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CURRENT ISSUES RELATED TO MEDICAL LIABILITY

REFORM

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

FEBRUARY 10, 2005

Serial No. 109–36

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas

MICHAEL BILIRAKIS, Florida

Vice Chairman

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi, Vice Chairman

VITO FOSSELLA, New York

ROY BLUNT, Missouri

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

C.L. ‘‘BUTCH’’ OTTER, Idaho

SUE MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

JOHN D. DINGELL, Michigan

Ranking Member

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

TOM ALLEN, Maine

JIM DAVIS, Florida

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

BUD ALBRIGHT, Staff Director

JAMES D. BARNETTE, Deputy Staff Director and General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON HEALTH

NATHAN DEAL, Georgia, Chairman

RALPH M. HALL, Texas

MICHAEL BILIRAKIS, Florida

FRED UPTON, Michigan

PAUL E. GILLMOR, Ohio

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

STEVE BUYER, Indiana

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE MYRICK, North Carolina

MICHAEL C. BURGESS, Texas

JOE BARTON, Texas,

(Ex Officio)

SHERROD BROWN, Ohio

Ranking Member

HENRY A. WAXMAN, California

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

GENE GREEN, Texas

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

TOM ALLEN, Maine

JIM DAVIS, Florida

TAMMY BALDWIN, Wisconsin

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

C O N T E N T S

Page

Testimony of:

Bean, James R., Physician Advisory Council, Alliance of Specialty Medicine ................................................................................................................. 18

Campbell, Sherrie ............................................................................................. 36

Glenmullen, Joseph P., Psychiatrist, Harvard Law School, Mental Health

Law School Health Services ......................................................................... 110

Huggins, Monty ................................................................................................ 33

Hunter, J. Robert, Director of Insurance, Consumer Federation of America ................................................................................................................... 84

Hurley, James, American Academy of Actuaries ........................................... 91

Joyce, Sherman ‘‘Tiger’’, American Tort Reform Association ........................ 103

Kingham, Richard F., Covington & Burling ................................................... 126

Malone, Dylan ................................................................................................... 39

Montemayor, Jose, CPA Insurance Commissioner, Texas Department of

Insurance ....................................................................................................... 54

Rasar, Mary ...................................................................................................... 42

Rosenbaum, Sara, Hirsh Professor and Chair, Department of Health Policy, the George Washington University Medical Center, School of Public

Health and Health Services ......................................................................... 100

Schwartz, Victor E., Shook, Hardy & Bacon, L.L.P ....................................... 136

Singh, Gurkirpal, Adjunct Professor of Medicine, Department of Gastroenterology, Stanford Business Square ........................................................ 121

Wolfe, Sidney M., Director, Health Research Group, Public Citizen ........... 130

Material submitted for the record by:

American Bar Association, letter dated February 16, 2005, to Hon. Nathan Deal ....................................................................................................... 16

American Medical Association, prepared statement of ................................. 170

American Osteopathic Association, letter dated February 10, 2005, to

Hon. Joe Barton ............................................................................................ 187

Hurley, James, American Academy of Actuaries, letter dated February

22, 2005, enclosing clarification for the record ........................................... 161

Joint Commission on Accreditation of Healthcare Organizations, prepared

statement of ................................................................................................... 162

(III)

(1)

CURRENT ISSUES RELATED TO MEDICAL

LIABILITY REFORM

THURSDAY, FEBRUARY 10, 2005

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON HEALTH,

Washington, DC.

The subcommittee met, pursuant to notice, at 1:05 p.m., in room

2123 of the Rayburn House Office Building, Hon. Nathan Deal

(chairman) presiding.

Members present: Representatives Deal, Hall, Upton, Norwood,

Shimkus, Shadegg, Pickering, Pitts, Bono, Ferguson, Myrick, Burgess, Barton (ex officio), Brown, Rush, DeGette, Capps, Allen, Baldwin, and Dingell (ex officio).

Staff present: Chuck Clapton, chief health counsel; Cheryl Jaeger, professional staff; Eugenia Edwards, legislative clerk; David

Nelson, minority counsel; Jonathan Cordone, minority counsel; and

Jessica McNiece, research assistant.

Mr. DEAL. The chairman will recognize himself for 5 minutes for

an opening statement.

Since this is my first hearing and the first time that I have presided over this subcommittee, first of all, let me welcome all of the

members of the subcommittee on both sides of the aisle. I think we

do have a very good working group and they will improve their tardiness, I am sure, as the year goes along. I am sure we will have

many other members that will join us here in just a few minutes.

We like to try to start as close to the time as possible, but especially today, since we did have a rather long panel to testify to our

subcommittee.

I would like, first of all, to thank also those of you who are going

to testify, because we know that you have taken time out of your

busy schedules and traveled many miles to be here with us. And

this is the first time this subcommittee has actually taken up the

subject of medical liability in this session, but it is not the first

time the subcommittee has visited the issue, obviously.

We are addressing, in this Congress, the issues that were addressed in previous Congress. And since it was not finalized, even

though the House did act on the issue, it still remains unresolved.

There is no denying, I think, that there is a medical liability crisis in this country. And I don’t think any of us deem it necessary

to go to great deal in reporting the statistics involved. We have

seen about the astronomical increases in the rates of medical malpractice insurance and the billions of dollars that are probably

2

being placed in the litigation costs as well as in, perhaps, unnecessary intensive practices. So it is a serious problem.

I come from a largely rural District in Georgia, and I view this

problem primarily as one of the access to healthcare. When the

only ob-gyn within a 200-mile radius of your home refuses to see

you because you are a high-risk patient, then there is a problem.

When you have to be flown to a neighboring State just to receive

a common medicine procedure that you normally would have been

able to receive in your hometown, then there is a problem. And

when people are literally dying because of lack of access to a local

trauma center, I think there is a problem.

What would any medical student, for example, be interested in

starting his or her medical practice in rural Mississippi where the

statistics indicate that the average physician’s salary is only

$72,000? But the annual premium for medical malpractice is

$70,000. That doesn’t sound like a very good career move to me.

Clearly something, I think, has to be done. That is why we have

invited such a wide range of people and witnesses today to testify

on this subject. I have spent 23 years of my career as a trial lawyer, and I realize if I say that, some of those in the position may

need to get in step, but I also served as a judge and as the chairman of our Senate Judiciary Committee in the State of Georgia before coming to Congress, and during that period of time, I participated in and was active in the introduction of legislative changes

to the tort system. Since I left there, of course, the problem has

gotten significantly worse. And I might just add, at this very

minute, the Georgia House of Representatives is debating a medical liability reform bill, and hopefully before the end of the day,

we will have some resolution on it.

But I recognize that this problem is not one of a single source,

and there is no magic bullet or any Band-Aid that is going to simply fix everything that we might think is wrong. But I do think

that if we begin the process, as we do today, by listening to those

in the community, those that are affected by it, and working with

our colleagues on both sides of the aisle, hopefully we can come up

with some solution that will begin to heal the process.

As Members of Congress, we have plenty of venues in which we

express our opinions in, but we rarely, I think, have an opportunity

to hear from such a wide variety of witnesses as we will have

today.

I would remind the subcommittee that we are not here to debate

the merits of any particular piece of legislation, either past or

present. We are here to learn, hopefully, from the distinguished

panel of witnesses that will address us here in just a few minutes.

I would hope that as this hearing today proceeds and as this subcommittee does its work during the year, that on both sides of the

aisle, we would agree to have two things: open minds and hearts

that are not hardened.

I have the great pleasure of having a fellow classmate of mine

in my freshman class, and my former neighbor, both in Longworth

and now in the Rayburn building, as the ranking chairman of this

subcommittee, and it is indeed my pleasure to recognize him, Mr.

Sherrod Brown from Ohio at this time for his opening statement.

[The prepared statement of Hon. Nathan Deal follows:]

3

PREPARED STATEMENT OF HON. NATHAN DEAL, CHAIRMAN, SUBCOMMITTEE ON

HEALTH

Let me just start off by thanking our witnesses for appearing before the subcommittee today. This subcommittee values your expertise and we are grateful for

your cooperation and attendance. I know several of our witnesses have literally traveled thousands of miles and put their busy lives on hold in order to be with us

today, and I think we should be respectful of their time and devote as much of this

hearing as possible to listening to what they have to say.

This is not the first time this subcommittee has taken up the subject of medical

liability reform and the fact we are having to address this issue again in the 109th

Congress is evidence to the fact that we as a legislative body have not yet been able

to do the job our constituents sent us here to do and find a satisfactory solution to

this ongoing crisis.

There is no denying the fact there is a medical liability crisis in this country, and

I do not need to repeat the staggering statistics about the astronomical rates of increase in the cost of medical liability insurance over the past few years or talk about

the billions of dollars wasted each year due to frivolous lawsuits and doctors forced

to practice defensive medicine in order for us all to recognize that we have a serious

problem on our hands that must be addressed as soon as possible.

Coming from a largely rural district in North Georgia, I view this problem primarily as one of access to heath care. When the only OB/GYN within a two-hundred-mile radius of your home refuses to see you because you are high-risk patient,

there is a problem with the current medical liability system. When you have to be

flown to a neighboring state just to receive a common medical procedure that was

once available in your own hometown, there is a problem with the current medical

liability system. And when people are dying because their local trauma center closed

down, there is a problem with the current medical liability system.

Why would any medical student be interested in starting his or her practice in rural Mississippi where the average annual physician salary is only $72,000, if he

or she expects to pay as much as $70,000 per year in malpractice premiums? That

doesn’t seem like a smart career move to me.

Clearly, something has to be done, and that is why we have invited such a wide

range of witnesses to appear before us today.

I have spent over 23 years of my career as a trial lawyer, which are two words

that often make physicians scowl a little bit. I have also served as a judge and was

the Chairman of the Judiciary Committee in the Georgia State Senate for eight

years where I was active in introducing legislation to help curb the growing problems in our state’s tort system. From this experience, I recognize this problem does

not have a single source and there is not a magic bullet or a Band-Aid solution that

will make it go away. That is why I am looking forward to having a cooperative

and productive hearing this afternoon and to working with my colleagues on both

sides of the aisle to come up with effective legislative solutions to this crisis in our

healthcare delivery system.

As Members of Congress, we have plenty of other venues available to us to express our own opinions, but rarely will we have an opportunity like this to get such

wide coverage of this complex and important issue. Let me remind this subcommittee that we are not here to debate the merits of any past or pending legislation; we are here to learn from our distinguished panel of witnesses in order for us

to work toward a solution to this growing crisis.

And I’ll now yield to the ranking member of this subcommittee, my freshman

class colleague and my former neighbor in both the Longworth and Rayburn Buildings, Mr. Brown of Ohio, for his opening statement.

Mr. BROWN. Thank you, Mr. Chairman. And I enthusiastically

welcome you, applaud the decision of Chairman Barton and of your

committee for putting you in this position and I look forward very

much to continuing the relationship we have had for 12 years in

working together on all of these issues.

Here is what I hope Congress will do when it comes to medical

malpractice. First, we should sit down and figure out what the

medical malpractice system should and should not be. Should it be

about deterrence, about compensation, about punishment, all, or

none of the above? Should we look dispassionately at how—then we

should look dispassionately at how the current medical malpractice

system measures up. Then we should decide without prejudice

4

whether we should fix the current system or scrap it. Then we

should look, again with prejudice, at various fixes or alternatives.

But I don’t think we will do any of that, because special interest

groups have a chock-hold on the process here in this Congress. And

by special interest groups, I mean the insurers, the doctors, the

lawyers, the drug companies, the medical device companies, the

HMOs, and even consumer groups that have a vested interest in

the outcome of our debate. But I also mean the political parties, of

which all of us are members, which have close and long-standing

relationships with those special interests.

I hope I am wrong. Maybe we can set all of that political baggage

aside and focus on the terrifying realities of medical malpractice,

the reality that 100,000 Americans die every year from medical errors, the reality that good doctors are leaving the medical profession because of rising malpractice premiums, the reality that defensive medicine makes America’s health care system less personal

and more expensive, the reality that malpractice insurance premiums increases sometimes have more to do with insurance company profits than they do with malpractice awards.

I hope we can work together to erect a system that provides justice to the victims of malpractice, a system that won’t punish doctors for honest mistakes, a system that gets to the root of the problem by helping to reduce both the frequency and the severity of

medical errors.

But to do it, we have to ask difficult questions. We have to ask

the trial lawyers why doctors are sometimes corralled into scattershot lawsuits. Why don’t they crack—we have to ask them why

don’t they crackdown on the unsavory characters who peddle personal injury lawsuits on television and charge exorbitant fees. We

have to ask the doctors tough questions, too. Just 5 percent of physicians were involved in 54 percent of medical malpractice payouts

during the 1990’s. We have to ask the doctors why it is that some

of their colleagues with track records like that are—with that kind

of incompetence, remain board certified. We have to ask the health

care providers why they shouldn’t be required to report medical errors, since the resulting data would, in fact, greatly enhance our

efforts to keep such errors from recurring. We would have to ask

insurers why they should not be held accountable for the business

decisions they have made that put doctors’ economic securities—security and patients’ health security at risk. We would have to ask

consumer groups why they so adamantly defend a system that fails

all too many people. And we would politely tell the drug industry,

the medical device industry, and the HMOs that we are not going

to let them cash in on this gravy train, cash in on the medical malpractice issue, or dodge responsibility when they, the drug industry, the insurance industry, and the medical device industry, actually do harm. If we didn’t know before how low they would go, we

sure do now.

Based on recent legislation and legislative approaches in the

process on this issue, I am not confident we will take that approach. I expect, instead, we will hear from the same predictable—

we will hear the same old predictable inflexible story from all sides.

I expect we will consider the same old partisan bill, a bill that punishes the wrong people and provides the wrong response to the

5

wrong problem. But if I am wrong, Mr. Chair, I stand ready to talk

with you and others about a new way to address this problem, a

way that puts partisanship aside and commits to asking the difficult questions and making the difficult choices.

Thank you, Mr. Chairman.

[The prepared statement of Hon. Sherrod Brown follows:]

PREPARED STATEMENT OF HON. SHERROD BROWN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF OHIO

Thank you, Mr. Chairman, and thanks to our witnesses for joining us this morning.

Here’s what I hope Congress will do when it comes to medical malpractice.

First we should sit down and figure out what the medical malpractice system

should and should not do. Should it be about deterrence? Compensation? Punishment? All or none of the above?

Then we should look dispassionately at how the current medical malpractice system measures up.

Then decide, without prejudice, whether we should fix the current system or scrap

it.

Then we should look again, without prejudice, at various fixes or alternate systems.

But I don’t think we’ll do any of this, because special interest groups have a

choke-hold on the process here in Congress.

And by special interest groups, I mean the insurers, doctors, lawyers, drug companies, medical device companies, HMOs, and consumer groups that have a vested interest in the outcome of our debate.

But I also mean the political parties of which we are all members—which have

close and long-standing relationships with those special interests.

Maybe I’m wrong. Maybe we can set all of that political baggage aside and focus

on the terrifying realities of medical malpractice:

The reality that 100,000 Americans die every year from medical errorsThe reality

that good doctors are leaving the medical profession because of rising malpractice

premiums

The reality that defensive medicine makes America’s health care system less personal and more expensive

And the reality that malpractice insurance premium increases sometimes have

more to do with insurance company profits than with malpractice awards.

Maybe can work together to erect a system that provides justice to the victims

of medical malpractice. A system that won’t punish doctors for honest mistakes. A

system that gets to the root of the problem, by helping to reduce the frequency and

severity of medical errors.

But to do it, we’d have to ask some hard questions and make some tough choices.

We’d have to ask the trial lawyers why doctors are sometimes corralled into scattershot lawsuits.

And why they don’t crack down on the unsavory characters who peddle personal

injury lawsuits on television and charge exorbitant fees.

We’d have to ask the doctors some tough questions too.

Just 5% of doctors were involved in 54% of medical malpractice payouts during

the 1990s. We’d have to ask the doctors why it is that some of their colleagues with

track records of incompetence remain board-certified.

We’d have to ask all of the health care providers why they should not be required

to report medical errors, since the resulting data would greatly enhance efforts to

keep such errors from occurring.

We’d have to ask insurers why they should not be held accountable for the business decisions that put doctors’ economic security and patients’ health security at

risk.

We’d have to ask consumers groups why they are so adamantly defending a system that fails so many people.

And we’d politely tell the drug industry, the medical device industry, and the

HMO industry that we’re not going to let them cash in on the medical malpractice

issue or dodge responsibility when they do harm. If we didn’t know before how low

they would go, we sure do now.

Based on recent legislation and legislative process on this issue, I am not confident we will take that approach.

6

I expect instead that we will hear the same old, predictable, inflexible story from

all sides. And I expect we will consider the same old partisan bill—a bill that punishes the wrong people and provides the wrong response to the wrong problem.

But if I am wrong, Mr. Chairman, I stand ready to talk with you about a new

way to address this problem. A way that puts partisanship aside and commits to

asking the tough questions and making the tough choices.

Mr. DEAL. Thank you, Mr. Brown.

I am going to call on the chairman of the full committee at this

time, Mr. Barton, for his opening statement.

Chairman BARTON. Thank you, Chairman Deal.

And I want to say welcome to chairing the Health Subcommittee.

This is the first subcommittee hearing that you are chairing. It

won’t be the last. And you start off with a difficult issue, so I appreciate your leadership on this.

I want to thank our witnesses for being here today. This is an

important issue. It is an issue that the Congress has attempted to

resolve on several occasions the last several years, and in each

case, bills have passed the House but have not passed the Senate.

I think it is beyond question that the current medical liability

system is broken. We have statistics that show that we had the

most expensive tort system in the world, and it cost $180 billion

last year, which is about 2 percent of our GNP. My home State of

Texas had medical malpractice claims that were skyrocketing. Doctors are leaving practice. Insurers are leaving the State. Several

years ago, we passed something called ‘‘Proposition 12,’’ which

capped some of these claims, changed the system for filing claims.

Last year, medical malpractice premiums fell about 16 percent, I

think, in our State.

So I am looking forward to this hearing and listening to this first

panel and the other panels. I would hope that this would be an

issue that we can work with our friends on the minority side on

a bipartisan basis. In the past, that has not been the case, but

maybe in this Congress, it will be the case. We do need to move

legislation and not just move it through the committee and through

the floor, but we need to go to conference with the Senate and put

a common sense bill on the President’s desk for his signature.

So I look forward to the hearing and look forward to the markup

and then moving the bills that are going to result from this hearing.

[The prepared statement of Hon. Joe Barton follows:]

PREPARED STATEMENT OF HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY

AND COMMERCE

Thank you, Chairman Deal, for holding this hearing today. It marks the first

hearing on health care issues for our Committee in the 109th Congress. It is entirely appropriate that the first hearing focuses on medical liability, which is one

of the most pressing problems currently affecting patient access to health care services.

The current medical liability system is broken. It denies patients access to critical

health services. It wastes billions of healthcare dollars annually, by forcing doctors

to practice defensive medicine. It also unnecessarily burdens injured patients, by

forcing them into a liability lottery that denies them access to fair, predictable and

timely compensation.

My home state of Texas provides an excellent example of the harm that can be

done by an out-of-control medical liability system. In the years before Texas adopted

medical liability reforms, doctors and other health providers faced a severe crisis.

The price of medical liability insurance had increased so dramatically—a 147 percent increase for some—that doctors could no longer bear the costs of obtaining covVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
7

erage, forcing them to abandon specialty practices, retire early, or move to another

state. When this happens, the real victim is the patient in need of care who simply

can’t find a qualified doctor to provide it. Insurers began leaving the state, which

forced over 6,500 doctors to seek alternative coverage. More than half of all Texas

physicians surveyed were considering early retirement and nearly a third said they

were considering reducing types of services they provide.

In 2003, Texas passed Proposition 12, a voter initiative that allowed the state to

adopt several meaningful medical liability reforms. Passage of these reforms produced real changes in Texas. Since 2003, premiums charged by the largest medical

liability insurer in Texas have dropped 16.4 percent. Patients are also now receiving

better access to care, because of the increases in the number of licensed physicians

in specialties like neurosurgery. Enactment of Proposition 12 is reversing the culture that dragged Texas into a crisis in the first place. We shouldn’t have to reach

such crisis in every state before we act.

Today we have the opportunity to learn more about the options available to us

to improve the medical liability system. I encourage my colleagues to listen to the

facts, explore the issues carefully, and commit to taking action. It’s time for this

Congress to enact common-sense reforms that protect injured patients while restoring sanity to our judicial process for all Americans. I look forward to this challenge.

I thank the witnesses for their testimony.

Mr. DEAL. Thank you, Mr. Chairman.

I recognize the ranking member of the full committee, Mr. Dingell, for an opening statement.

Mr. DINGELL. Mr. Chairman, thank you for the courtesy.

Congratulations on your first hearing.

Mr. Chairman, the rising cost of malpractice insurance is a real

problem for doctors and patients alike. This is a serious concern

and it deserves serious and deliberate consideration. Unfortunately, the White House and my colleagues on the Republican side,

are again responding with proposals that would overhaul the judicial system well beyond the issues that are required to be addressed to deal with the problem of medical malpractice.

While inefficiencies in our courts are a contributing factor, they

are by no means the only cause or even the largest single cause of

the current crisis. Physicians and other medical providers deserve

immediate assistance, not hollow promises that are, in fact, designed to shield large corporations from their responsibilities to

both doctors and patients. Past and current Republican proposals

would provide virtual immunity baths for HMOs, for insurance

companies, and for drug and device manufacturers. I find it curious

that not one of these companies has come forward to explain why

it needs special protections, yet my colleagues on the majority side

seek to grant them status under the law that is unprecedented.

Why is this immunity bath necessary, and why must it encumber

medical malpractice legislation, which has an opportunity to do a

great deal of good and to be properly focused on a serious problem?

Moreover, it is not enough to say that the regulators alone will

protect the public. The committee has a long and proud history of

overseeing the Food and Drug Administration. For decades, we

have uncovered grave threats to the safety of food, drugs, devices,

and blood where FDA could not, or would not, pay sufficient attention. Recent bipartisan investigations into antidepressants and a

class of painkillers, known as COX-2 inhibitors, have again revealed that the FDA by itself cannot be relied upon to assure that

our prescription medications are properly labeled as to the real

risks and benefits.

The leadership on the other side of the aisle is once again asking

physicians and patients to cross their fingers and hope that some

8

of the benefits bestowed upon insurance companies, HMOs, and

drug and device companies will trickle down to them. Lots of luck.

At the same time, women, seniors, and low-income families are

being asked to pay the very real human cost of medical negligence

and misbehavior they are powerless to change. This is wrong.

Thank you, Mr. Chairman.

Mr. UPTON [presiding]. Thank you, my friend from the State of

Michigan.

I am the acting chairman for a moment while Chairman Deal is

visiting with some folks, but I want you to know that I was next

on the list anyway, so I will make my—it is not just because I am

the——

I commend my chairman, both chairmen, Chairman Barton and

Chairman Deal, for holding today’s hearing to address and assess

the need to enact a Federal medical liability reform to—as it pertains to the growing malpractice insurance crisis impacting physicians, hospitals, and other health care providers in many States

and address some of the factors fueling the double-digit increases

in health care premiums with which both large and small employers and individuals and families across the Nation are grappling

with.

My State of Michigan has already put into place a number of important reforms similar to the Federal reforms that we are contemplating today. As a result, Michigan is not experiencing this serious

medical liability insurance crisis that is gripping many other

States, but we are not immune from such experiences as sharp increases in premiums and insurers withdrawing from our market.

Several years ago, an emergency physician group in my District,

serving one of the largest hospitals in my District, almost lost its

medical liability insurance. Had help not come at the very last

minute, an entire community could have lost access to emergency

care. Similarly, recently a large physician practice serving the poor

and uninsured in Southwest Michigan could not afford to renew its

malpractice insurance policy because of a sharp increase in their

premium. They were eventually able to find more affordable insurance, but only by increasing their exposure.

While I have been, thus far, very supportive of Federal medical

liability reform, I hope that, as this process moves along, we will

be mindful of one potential problem that a Federal preemption of

certain State laws could pose for physicians. Specifically, many

Michigan physicians are concerned that a Federal law which preempts our State’s joint and several liability provision and replaces

it with a fair share liability provision will force many of them to

purchase significantly more coverage than they do now under our

own State law. With that said, Michigan physicians, like physicians

across the country, are concerned about the rising costs of health

care in this country. And whether it be for employers who struggle

to continue to provide coverage for their workforce and retirees, or

the double-digit annual increases in the growth of Medicare and

Medicaid programs, we know that defense medicine, and all that

it entails in extra costs and procedures, is one of those factors fueling the double-digit increases and that medical liability reform

across the Nation is one part of the solution to reigning in health

care costs for all of us and moving us toward the goal of ensuring

9

that every American has ready access to high-quality, affordable

health care.

I look forward to working with the members of this committee

in a bipartisan basis to get this legislation through the House,

working with the Senate, and on to the President’s desk. And I

would yield my—the balance of my time and recognize the good

gentleman from Chicago, my friend and member of the powerful

Subcommittee on Telecommunications, Mr. Rush, for an opening

statement.

Mr. RUSH. Thank you, Mr. Chairman, for that fine introduction,

and I want to thank you for recognizing me. And I want to thank

the subcommittee chairman for holding this hearing.

I want to welcome our panelists, also, that are before us today.

Mr. Chairman, this is a tough issue for me, and I am very aware

of and sensitive to the problem of rising malpractice insurance premiums that doctors are facing. In my Home State of Illinois, we are

almost at a crisis level. I talk to doctors in my State all of the time,

and many of them are thinking about moving across the border to

Wisconsin where premiums are considerably cheaper. Many have

already done so. And Joe, I am always concerned over the lack of

quality health care in poor, undeserved communities, and I am

very worried that rising malpractice insurance costs will only exacerbate this problem.

But the question is how do we reform the system and provide

premium relief to doctors? Do we reform civil procedures? Do we

reform the insurance markets? Do we cap damage awards?

Mr. Chairman, public policy is almost always about cost-shifting.

The problem with capping non-economic damage awards, often referred to as ‘‘pain and suffering,’’ is that it merely shifts costs from

doctors onto the patients or the victims. This is a simple fact that

the proponents of damage caps ignore or are unwilling to acknowledge. Such advocates are too quick to argue that doctors would immediately benefit from lower insurance premiums. But they refuse

to, on the other hand, acknowledge that the people who will suffer

most from such caps are lower-income adults who suffer from egregious, inexcusable, and devastating medical errors, such as the

death of a spouse. These lower-income victims do not, relatively

speaking, benefit from unlimited economic damage awards, because

their financial horizons are not as rosy as higher-income victims.

Thus, in the proposal to cap non-economic damage awards is a discrimination against lower-income victims.

Proponents of such strict damage caps should at least be honest

and acknowledge that they are advocating for this type of costshifting from doctors to lower-income victims. I think this type of

honesty and candor will serve to elevate this debate. I, for one, am

open-minded on this issue, and I am willing to look at all solutions

that will serve my constituents and Illinois doctors as well. But let

us be honest about the costs and benefits of all of these myriad of

proposals.

With that, Mr. Chairman, I—again, I want to thank you, and I

yield back the balance of my time.

Mr. UPTON. The gentleman’s time has expired.

The gentleman from Georgia for an opening statement, Mr. Norwood.

10

Mr. NORWOOD. Thank you, Mr. Chairman. I am going to defer

my time for questioning, but I would like to take a minute and welcome my constituent from Watkinsville, Georgia, Sherrie Campbell.

I know what her problem has been very well, because it is in my

District, and I am very excited about her coming up here and telling this committee what happens when you don’t have Congress

act on tort reform.

Welcome, Sherrie.

Mr. UPTON. The gentleman defers.

Mr. Burgess for an opening statement.

Mr. BURGESS. Well, thank you, Mr. Chairman.

And I, too, want to thank you for holding this hearing on an

issue that is important to me and to patients throughout the country.

Before I came to Congress, I was a simple country doctor with

25 years of experience, and I have seen up close and personal how

the liability crisis has impacted others in my profession and the patients that we serve. And I would agree with the ranking member

from Ohio. In a perfect world, we would have a perfect bill, but this

is Congress. And the best we can hope for is a common sense bill,

and perhaps a bill that takes good ideas that have worked in those

great laboratories across the land, called States, to take these good

ideas from State legislation that would work on a national basis.

Texas—my home State of Texas, has new legislation. In the past

18 months, this legislation has provided real relief. And in fact,

premiums in my State, medical liability premiums have decreased

or remained flat or, if they have increased, they have increased at

one-half to one-third the rate of neighboring States, most importantly in a State that had gone from 17 insurers down to 2. We

now have new insurers coming back into the marketplace, which

is just absolutely critical.

A perineotologist in from my District, a young man who had

studied in obstetrics and gynecology and gone on to do specialty

work in high-risk pregnancies, they have made him a target for liability suits, had to stop his practice after 2 or 3 years, because he

simply could not afford the $125,000 premium that he was faced

with. This is a young man that had trained in our State institutions. So we, the taxpayers of Texas, had, essentially, paid for his

education, and now he was going off to work in private business,

because he could not afford to continue to practice his medicine.

Our community lost a young man in the prime of his career in a

sorely needed specialty because of the medical liability situation.

On a recent trip to Alaska, I went through the town of Gnome.

And you can imagine Gnome, Alaska, a Congressional delegation

coming through causes a lot of excitement. And the doctors from

the hospital were there to meet us for lunch as part of a big chamber group. Well, they heard that I was a doctor. One of them came

up to me and said, ‘‘Boy, I sure hope you do something about liability reform, because we can’t afford an anesthesiologist at our hospital because of the premiums.’’ And I said, ‘‘Well, what type of

medicine do you practice?’’ He said, ‘‘Just like you, I am an ob-gyn.’’

And I said, ‘‘Bubba,’’ that is a Texas expression, ‘‘Bubba, what do

you mean you practice ob without an anesthesiologist? What do you

do if you have to do a C-section?’’ He said, ‘‘Then we call a plane,

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and we transfer the patient to Anchorage.’’ And Anchorage is about

a 11⁄2 hour flight from Gnome, Alaska. And they do, on occasion,

have bad weather in that State. I fail to see how we are advancing

the cause of patients’ safety by allowing this situation to continue.

And I will yield back.

Mr. UPTON. The gentleman’s time has expired.

The gentlelady from Wisconsin, Ms. Baldwin.

Ms. BALDWIN. Thank you, Mr. Chairman.

I wanted to start out by taking a moment to describe the medical

liability insurance situation in my Home State of Wisconsin.

In short, we don’t have a crisis in Wisconsin. Medical liability insurance is both available and affordable for Wisconsin’s physicians.

When Wisconsin addressed this issue in 1975, we started from the

premise that you don’t deal with rising malpractice insurance costs

by blaming the victims. You start by addressing the insurance

issues. And Wisconsin did this in three ways.

First, we required that all doctors have malpractice insurance.

Second, we created an insurer of last resort, the Wisconsin

Health Care Liability Insurance Plan, commonly known as WICLIP

in Wisconsin, to provide affordable malpractice insurance to those

who couldn’t find any in the private market. WICLIP has been very

successful, keeping the rate of increase at or near inflation in recent years.

Finally, we created the Wisconsin Patients Compensation Fund.

The Patients Compensation Fund covers all economic damages exceeding $1 million per occurrence or $3 million per year. The Patient Compensation Fund rates, paid by all health care providers

in the State, have fallen during recent years. By pooling risk and

making sure all doctors have coverage, Wisconsin has successfully

addressed this issue. And these actions controlled malpractice costs

long before Wisconsin capped non-economic damage.

This brings me to my final point. This should be a State issue.

Each State has the authority and capacity to address any problems

they have. A one-size-fits-all approach can be overly broad and encroach upon traditional State authority. Soaring malpractice insurance rates need to be addressed with two principles in mind. First,

do no harm to the victims in medical errors. And second, start by

addressing the problems of inadequate or expensive insurance.

In light of these two principles, narrow Federal caps on non-economic damages are not the way to address the problems with malpractice insurance. We need to put victims first in this debate and

find constructive and effective ways to reduce medical errors.

Thank you, Mr. Chair. I yield back.

[The prepared statement of Hon. Tammy Baldwin follows:]

PREPARED STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WISCONSIN

Thank you Mr. Chairman. And thank you to the witnesses who have come to testify before us today.

I want to start out by talking just a little bit about the medical liability insurance

situation in my home state of Wisconsin. In short, we don’t have any sort of crisis

in Wisconsin. Medical liability insurance is both available and affordable for Wisconsin’s physicians.

When Wisconsin addressed this issue in 1975, we started from the premise that

you don’t deal with rising malpractice insurance costs by blaming the victims. You

start by addressing the insurance issues.

12

And we did this in three ways. First, we required that all doctors have malpractice insurance.

Second, we created an insurer of last resort—the Wisconsin Health Care Liability

Insurance Plan—to provide affordable malpractice insurance to those who couldn’t

find any in the private market. WICLIP has been very successful, keeping rate increases at or near inflation in recent years.

Finally, we created the Wisconsin Patients Compensation Fund. The Patients

Compensation Fund covers all economic damages exceeding $1 million per occurrence or $3 million per year. The PCF rates—paid by all health care providers in

the state—have fallen during recent years.

By pooling risk and making sure all doctors have coverage, Wisconsin has successfully addressed this issue. And these actions controlled malpractice costs long before

Wisconsin capped non-economic damages.

That brings me to my final point. This should be a state issue. Each state has

the authority and capacity to address any problems they have. One-size-fits-all approaches are overly broad and encroach on traditional state authority.

Soaring malpractice insurance rates need to be addressed with two principles in

mind. First, do no harm to the victims of medical errors. Second, start by addressing

the problems of inadequate or expensive insurance. In light of these two principles,

narrow federal caps on non-economic damages are not the way to address the problems with malpractice insurance.

Caps in Wisconsin have not resulted in lower heath care costs. Health care costs

are rising for many other reasons. We need to put victims first in this debate and

find constructive and effective ways to reduce medical errors.

Mr. DEAL. The Chair recognizes Ms. Bono.

Ms. BONO. Thank you, Mr. Chairman. I will waive other than to

thank you for this very important hearing and look forward to

hearing from all of our witnesses.

And with that, I yield back.

Mr. DEAL. Ms. DeGette, you are next. Would you like to go ahead

and try to get your statement in——

Ms. DEGETTE. Yes, sir.

Mr. DEAL. [continuing] before we go vote?

Ms. DEGETTE. Thank you, Mr. Chairman.

Mr. Chairman, I welcome your leadership of this committee and

also your opening remarks about bipartisan solutions. I truly hope

that this hearing marks a fresh start for the 109th Congress on

this issue, because, frankly, we had a disgraceful record on this

issue in the 108th Congress.

Sitting on this subcommittee when we marked up the medical

malpractice bill in the 108th Congress, I was dismayed, to say the

least, about the complete lack of willingness on the part of the majority to negotiate with anybody. It got to the point, for example,

when there was a problem with the definition of the statute of

repose in the bill, when I approached the sponsor of the legislation

and asked him to work with me on making the definition of that

narrow technical term, the common standard definition, he said, ‘‘I

can’t make one change to this bill without going back and talking

to the groups who wrote the bill.’’ And he went back and talked to

the groups who wrote the bill, and they said no, and they wouldn’t

even change that one thing.

We can have medical malpractice reform, if we want to. We could

come up with a negotiated agreement, but it really is going to take

bipartisan cooperation and discussion. Issues like should we really

put caps on non-economic damages but, at the same time, not

spend one instant in the bill talking about insurance companies

and insurance practices for malpractice insurance. Doctors in many

parts of the country are getting hammered with increasing malVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 20143.TXT HCOM1 PsN: HCOM1
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practice insurance costs, but the bill in the 108th Congress did

nothing, not even a study, to look at the malpractice insurance industry.

Now if we really wanted to fix this crisis, I would suggest any

legislation would involve an examination of malpractice insurance

writing policies and how we can fix that. That is what worked in

California.

To give you an example, in Colorado, my home State, where we

have had insurance reform for many years, insurance—or I am

sorry, malpractice reform and caps on non-economic damages, insurance companies took in over $119 million in premiums in 2001,

but yet they paid out only $36 million in claims. So I think everything needs to be on the table. And the first thing that needs to

be on the table, Mr. Chairman, is the question of is Congress really

the uber State legislature. Is the issue of the inaction of State legislatures, in some states, an issue that we should take to Congress

and take rights away from victims of medical malpractice in order

to try to help a problem that, frankly, is not going to be helped unless we look at every aspect of the issue?

With that, Mr. Chairman, I ask unanimous consent to put my

full statement in the record and yield back.

Mr. DEAL. Without objection.

We are going to try one more quickly.

Mr. Ferguson, are you prepared to make an opening statement?

Mr. FERGUSON. Thank you, Mr. Chairman.

Mr. DEAL. I will recognize you for 3 minutes.

Mr. FERGUSON. Thank you.

Good afternoon. Thank you, Mr. Chairman. Congratulations on

your chairmanship, and I look forward to working with you and all

of the members of the subcommittee. And thank you, too, for bringing this important issue before the subcommittee. This affects our

Nation’s doctors. It affects so many people, but it ultimately affects

every single one of us and our families. I became familiar with this

issue when we had our—a child a couple of years ago, and my

wife’s doctor said, ‘‘Well, I am trying to find someone who can cover

for me if I am not going to be there, because my partner,’’ this—

my—our physician’s medical practice partner had just left New Jersey because she couldn’t afford the insurance premiums any longer.

My wife’s physician, her insurance premiums had gone up 40 percent that very year, and this is a bright, talented physician who

was considering giving up the practice of obstetrics altogether, because she couldn’t afford her insurance premiums any longer. This

is clearly a crisis. We had physicians and hospitals and medical

specialists, they are severely limiting their practices because of the

cost of insurance and overburdening this fear of litigation. Some

health care providers are even leaving the State, as I mentioned,

and others are just leaving the practice of medicine.

In November 2002, a study by the Medical Society of New Jersey,

in my Home State, discovered that 45 percent of medical practices

reported that they had adjusted their operations because of problems with the costs of medical liability insurance. These are making changes in the practices, which had a severely negative impact

on patient care. They were declining to purchase new equipment.

They were laying off staff. They were refusing to accept new paVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 20143.TXT HCOM1 PsN: HCOM1
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tients. According to the American College of Obstetricians and

Gynecologists in New Jersey, 65 percent of the hospitals report

that physicians are leaving because of insurance—higher increased

insurance premiums.

This longer—this problem can’t be—go unaddressed any longer.

It is imperative that this committee and the Congress act in a way

that it can ensure that all Americans have access to quality health

care. We have to preserve the sacred relationships between patients and doctors. We have to encourage bright, young, talented

professionals. We have to encourage them to go into the field of

medicine. So many young people today are not even considering

going into the field of medicine today because of the fear of litigation and the fear that they won’t even be able to make ends meet

as a trained health care professional.

The message is clear. Physicians and other health care providers

want to continue helping patients in need. And patients don’t want

to lose these trusted relationships that they enjoy with their doctors. Without Federal legislation—I would love it if every State

handled this problem in a way that was best for them, but in my

Home State of New Jersey, they passed a bill. Frankly, it was a

substanceless bill. It was—put a little Band-Aid on a gaping

wound. It did not solve the problem.

There is a need for Federal legislation. This problem is not going

to go away. We need to address it, and I look forward to addressing

it this Congress.

Thank you, Mr. Chairman.

Mr. DEAL. Thank you.

I am going to recognize Mr. Brown very quickly.

Mr. BROWN. Yes, thank you, Mr. Chairman.

Before we break, I would like to recognize Tammy Baldwin for

her first hearing on—it is her first year on the full committee, her

first day on this subcommittee and recognize Congressman Allen,

who is a second-termer on the full committee and his first time on

this subcommittee, and Lois Capps, who has been on this subcommittee for a long time.

Ms. BALDWIN. I want to make a statement, if I could——

Mr. DEAL. Well, we don’t have time. We are going to have to go

vote. I would like to also recognize our two new members who are

here, Ms. Bono from California, and Dr. Burgess from Texas.

With that, we are getting close on this vote. We are going to

stand in recess. And the best estimate I can give you is probably

going to be 45 minutes, it looks like, at least, before we get back.

We will stand in recess.

[Brief recess.]

Mr. DEAL. The subcommittee will come to order.

We are in a time bind for some of our witnesses, and so we are

going to try to get this opening statement process completed as

quickly as possible.

Ms. Capps, you would be next.

Ms. CAPPS. Thank you, Mr. Chairman.

I do think it is important for the Congress and this committee

to address barriers to access to health care. One emerging barrier

seems to be the rise in medical malpractice insurance rates taking

place in various parts of the country. We should do something

15

about this, but we should be sure we are actually solving the problem and not making a bigger mess. There is serious debate about

why premiums are rising and what should be done to stem their

growth.

The truth is that the experts are uncertain what exactly is driving premiums. The evidence is mixed. The majority has put forth

proposals in the last two Congresses to limit consumers’ ability to

hold accountable negligent doctors, profit-driven HMOs, insurance

companies, and prescription drug companies. They claim that excessive or frivolous lawsuits are the cause of rising premiums. The

problem is that these lawsuits are, by definition, not frivolous.

Where the large damages are awarded, a jury has found that the

patient has been severely harmed. We should not leap to the conclusion that capping the damages an injured person receives because of malpractice is the way to solve the problem. The majority

proposal will penalize innocent victims of medical negligence.

Furthermore, this proposal goes far beyond patients and doctors.

The majority’s bill would protect drug companies, HMOs from lawsuits filed by injured people. In 3 years of considering this issue,

the majority has not presented a shred of evidence that drug companies that make billions of dollars in profits need these protections. If the majority’s proposal were to become law, the ability of

injured patients to hold negligent drug companies would be dramatically limited, and we have all seen the recent stories about

Vioxx. They highlight the fact that drug companies may harm patients. They expose how dangerous the majority’s bill could be.

I believe the majority should be given a chance to defend their

proposal, so I hope, Mr. Chairman, you will hold additional hearings on the legislation itself, and I hope we will hold a markup on

any legislation to be considered on the floor. The Energy and Commerce Committee has a rich legislative history. We should not

allow ourselves to simply become a select committee without a legislative role.

I yield back.

Mr. DEAL. I thank the gentlelady.

I believe we have now finished opening statements.

Mr. BROWN. Mr. Chairman, I think Congressman Allen is—do

you want to make a statement? Okay. Yes, he was—I know he was

on his way, and none of those people look like Tom Allen. I was

talking about the other three.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF ILLINOIS

Thank you, Chairman Deal, for organizing this hearing, the first of our Subcommittee in the 109th Congress. I’m pleased to be here today to address what I

feel is the most crucial health care issue in my district today: the medical liability

crisis.

We have all heard the stats on the lack of physicians in our areas, and my home

county is probably the hardest hit due to the legal climate that we face.

As the representatives from the American Tort Reform Association can testify

today, their group has named Madison County its ‘‘Number One Judicial Hellhole’’

in the country for 2004.

Some may suggest moving to another county to avoid this situation. Unfortunately for my constituents, our neighboring county of St. Clair has been named

‘‘Number Two’’ on the list!

16

Hospitals in those two counties have lost more than 160 doctors because of the

medical liability crisis. These physicians just cannot afford to pay their premiums,

which have skyrocketed in recent years.

President Bush outlined his plan for addressing this issue when he visited my district on January 5th. He is committed to Medical Liability Reform this year—and

I believe that the House and Senate should be, too.

In rural areas like my district, we already have ‘‘access-to-care’’ problems strictly

by nature. But when we hear the staggering news of physician resignations, it affects all aspects of life-not just health care.

Without immediate action, the possibility for economic growth in Southern Illinois

will be seriously threatened. To stay competitive in a global marketplace and keep

jobs in America, we must ensure that our nation’s health care delivery system is

fully intact.

I again would like to thank Chairman Deal for holding this hearing, and I look

forward to the testimony from our witnesses.

PREPARED STATEMENT OF HON. PAUL E. GILLMOR, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF OHIO

Mr. Chairman, I congratulate you on your new position and thank you for kicking-off the 109th Congress by delving into our nation’s medical liability system and

the need to reform it. Furthermore, I am honored to be sitting as a member of this

subcommittee for the first time in my career.

I’d also like to commend the well-balanced panel of witnesses. I am confident we

will hear from all sides of this issue today. Of note, like many other states, the current medical liability system continues to be of great concern to Ohio physicians and

patients alike. In particular, I look forward to learning more about the relationship

between health care costs and malpractice litigation, and whether patients are being

compensated fairly. I am also anxious to hear about the level of impact that tort

reform and medical liability measures, passed previously by the House, could have

on our current crisis.

Over the last two Congresses our body has aggressively pursued reform that is

both fair and efficient. Once more, I am glad that we continue to bang away at this

issue and remain optimistic that our panel will be instrumental in improving a patient’s care and access to specialty services, as well as our nation’s healthcare delivery system as a whole.

Again, I thank the Chairman, and yield back the remainder of my time.

PREPARED STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS

Thank you, Mr. Chairman, for holding this hearing on the medical malpractice

situation in many of our states. This is an important issue that has been discussed

exhaustively in this committee in the past several Congresses. However, in years

past, the committee has been able to address this issue with respect to specific legislation. Then, I expressed concerns that the committee was rushing to pass legislation which I thought would do little to solve the problem of escalating malpractice

premiums. But now, we can’t even effectively discuss our options in addressing this

issue because we have no piece of legislation to examine. On top of that, once a legislative vehicle is eventually identified, we have no assurance that the committee

will address it through regular order. Yet again, the committee’s response to this

issue is occurring too soon and too fast.

In addition to procedural concerns, I remain concerned that we’re overstepping

our jurisdictional boundaries with our action on this issue. For more than 200 years,

the states have had jurisdiction over this issue, and it should continue to be that

way. At least 38 states have addressed this issue by capping either punitive damages, non-economic damages, or both. Having served in the Texas State Legislature,

I know first-hand that state legislatures are best positioned to determine whether

and how to address the medical malpractice situation in their individual states. The

situation is different in each state, and a Washington-knows-best approach ignores

the hard work and tough decisions that individual states have made.

The legislation we’ve considered in years past has had significant flaws, and I

hope that the majority’s delay in producing a legislative vehicle indicates their intent to remedy some of the problems associated with their previous bills. Two particular provisions come to mind. First, previous bills have included a firm $250,000

cap on non-economic damages without providing for inflation adjustment in future

years. While that figure mirrors California’s MICRA law, it is important to recogVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
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nize that California’s cap has not been adjusted for inflation in approximately thirty

years. Further, California’s law was crafted during a time when a $250,000 cap

would have sufficed for all but the most egregious jury awards—which, I might add,

the judge has the discretion to overturn. That is certainly not the case in the 21st

Century, and who are we to put a price on pain and suffering? A cap on non-economic damages would create a one-size-fits-all figure for each and every case of

medical malpractice. Members of Congress do not hear the details of each medical

malpractice case. Members of juries do, which is why they are best equipped to determine the appropriate non-economic damages based on the facts of each case.

The medical liability reform bills previously passed by the House also contained

a dangerous provision that would provide drug companies and device manufacturers

with an affirmative defense against punitive damages as long as their products had

FDA approval. This provision presupposes that FDA approval is an air-tight process

whose integrity need not—and legally cannot—be questioned. Considering the FDA’s

recent track record with regard to Vioxx and other pharmaceuticals that have been

removed from the pharmacy shelves, it is clear that the integrity of the FDA approval process has been compromised. Until some serious reforms are implemented

at the FDA, the FDA stamp of approval should not provide any company with an

affirmative defense against punitive damages. Such a provision would only provide

drug and device manufacturers with even less of an incentive to report known adverse events before their products go to market and ensure that their products are

as safe as possible.

Given these serious outstanding issues, Mr. Chairman, I think it is unwise to proceed with this discussion until we have a specific proposal to discuss. Above all, I

would hope that the committee would recognize the grave issues surrounding this

debate—both substantively and jurisdictionally—and afford us the regular order

that should accompany any reform as serious as medical liability reform.

Thank you, and I look forward to the witness testimony.

PREPARED STATEMENT OF HON. THOMAS H. ALLEN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MAINE

Thank you, Mr. Chairman.

President Bush says there is a medical liability crisis and his medical malpractice

proposals will stop frivolous lawsuits against doctors. The President has not told the

public that his proposals will probably contain unrelated liability protection to the

drug and medical device industries, HMOs and other health insurance companies.

No medical malpractice reform should protect pharmaceutical and medical device

companies from punitive damages. They are fully capable of defending themselves.

The Food and Drug Administration approves drugs or medical devices for safety and

efficacy, but numerous examples exist of companies not disclosing all their data. The

Republican plan to introduce the bill after this hearing, by-pass Subcommittee and

Full Committee mark-ups and move the bill to the House floor should be reconsidered.

This Committee knows better than to trust the FDA to provide the prescribing

community and the American people with timely, appropriate information about the

risks and benefits of specific drug therapies.

We know better than to rely on the competency and independence of the FDA on

matters related to drug safety, particularly post-market safety, because our Subcommittee on Oversight and Investigations has conducted investigations for decades

that have exposed glaring weaknesses in the regulatory framework and performance

of the FDA relating to the safety of prescription drugs (including blood which is classified as a drug) and medical devices.

In the past Congress alone, we examined the systemic and personnel weakness

in that Agency that have led doctors and their patients to rely on the claims of the

makers of Accutane and the antidepressants Zoloft, Paxil, Effexor, Serizone,

Remeron, and Celexa when the FDA knew of dangers that were not addressed in

the labeling of those drugs.

From public accounts, we can expect that the O&I investigation into the marketed

Cox2 drugs, Vioxx, Celebrex and Bextra, will ultimately reach the same conclusion.

This is not the hearing to go into the specifics of these case studies; Accutane and

the SSRI case studies are in our record. Nor is it the time and place to hash out

the various causes, insufficiencies in the law, questionable policy choices or failures

at the FDA, including incompetence and possible malfeasance.

But, given this Committee’s experience, we must not allow a medical malpractice

bill to limit the tort liability of companies with great financial resources simply because they received FDA approval for a harmful product.

18

Republicans and Democrats alike have recognized the FDA’s recent incompetence

when it comes to protecting the public and ensuring drug safety. At our first Oversight hearing on September 9th, 2004 Chairman Barton stated, ‘‘The conduct by the

FDA has only reinforced my past sentiments that the Food and Drug Administration really stands for Foot Dragging and Alibis, and that is not acceptable.’’ Also

at that hearing, Rep. Walden noted, ‘‘The regulatory agency charged with protecting

the public health is preventing a company from disseminating important safety information to parents, the public, and physicians.’’

On September 23rd Chairman Barton said, ‘‘Time after time in reviewing the documents and reviewing the transcripts and the testimony, it really does appear to

me that the FDA has gone out of its way to short circuit findings.’’

Senate Republicans concur that the FDA has proven unable to do its job effectively. At a Senate Finance hearing on November 18th of last year, Senator Grassley stated, ‘‘What’s come to light about Vioxx since September 30th makes people

wonder if the FDA has lost its way when it comes to making sure drugs are safe.’’

He continued on to say, ‘‘One of my concerns is that the FDA has a relationship

with drug companies that is too cozy,’’ and that, ‘‘The FDA has also stood watch

over failures when it comes to drug safety.’’

My Republican colleagues are clearly aware of the FDA’s recent failures and yet

it seems only a matter of time before they will introduce tort reform legislation that

contains, once again, the FDA defense. But we all know that the FDA is unable—

on a continuing basis—to protect the public from dangerous drugs. To rely upon the

FDA for assurance that approved medicines are sold with the most recent and relevant information regarding their safety and efficacy profiles is simply folly. Stripping patients of their right to legal recourse is not the answer. The FDA defense

for tort claims against companies making drugs or medical devices has no place in

any bill, certainly not one dealing with malpractice claims against physicians.

Mr. DEAL. We do have some witnesses that have got some airplanes to catch, I know, and you know, we always have the right.

I would ask the ranking member if they do want to make an opening statement, if they will stick around until after this second

panel, we would be glad to have a closing statement, if they would

like to do that, or they can submit it for the record, obviously.

Let us begin with our first panel. And thank you for being patient. And thanks to the others, also.

First of all, Dr. James R. Bean, a neurosurgeon from Kentucky,

would be the first person to testify. I understand you have been in

surgery yesterday. We do appreciate your taking time to come to

be with us today.

We also have Dylan Malone, Sherrie Campbell, Monty Huggins,

and Mary Rasar. And you each have 5 minutes.

And Dr. Bean, we will start with you.

STATEMENTS OF JAMES R. BEAN, PHYSICIAN ADVISORY

COUNCIL, ALLIANCE OF SPECIALTY MEDICINE; MONTY HUGGINS; SHERRIE CAMPBELL; DYLAN MALONE; AND MARY

RASAR

Mr. BEAN. Mr. Chairman, I appreciate the opportunity to come

and speak. My name is Jim Bean, and I am a neurosurgeon. I have

been in practice for 20 years in Lexington, Kentucky, so I have had

some chance to view what has been going on. I do speak for the

Alliance of Specialty Medicine, 13 special societies also.

Before I make my statement, though, I just want to recount a

story that happened to me when I was in practice in about 1982.

When I was in surgery, we had a call from the emergency room.

A girl of 3 years old, had come to the emergency room, had fallen

down stairs. Her mother was a realtor. She had been in a house

and fell down the stairs and 15 minutes later vomited. Fifteen minutes later, the child is in the emergency room drowsy. We did a

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quick CAT scan and saw that there was a growing blood clot, called

an epidural hematoma. So he called up there. Knowing that this

child had only a limited time, I said, ‘‘Vinnie, I will finish my surgery. Put her in the other room.’’ I left there in 10 minutes, did the

surgery, took out the blood clot. By that time, she was in a coma

with a dilated pupil, meaning the end was near, and she recovered.

And the point was, it was fast. It was a child, and it was fast. And

I got a letter and a picture from her mother about 15 years later,

back in the mid-1990’s. She graduated from high school.

The point of the story, though, is this is unlikely to happen in

today’s environment, because what we have is neurosurgeons no

longer treating pediatric patients. 75 percent, because of liability,

won’t see them. And if a child were in that hospital, they would

be transferred another hour or 2 away, and that is too late. So we

have disasters that not only are waiting to happen, but they are

happening. I hear about them. I hear about them in Illinois. I hear

about them in Oregon and other places where the liability crisis is

occurring. And it is not just neurosurgery. We have obstetricians.

15 percent of them are baby doctors, and they don’t deliver babies.

You have heard about it, but I want to emphasize. Even high-risk

treatment, 25 percent of obstetricians won’t take a reduced, highrisk treatment. Why? Because they can’t afford the liability.

We think the cause is simple. We know that there is debate

about it, but we see the rising jury awards, and we see our premiums going up. And what it appears to us, from the data, is that

the amount of money going out has to be an amount matched by

the amount of money going in. That is how you pay those things.

We have seen our premiums rise, across the country, among neurosurgeons, 84 percent, on an average, good States and bad, over the

last 4 years, since the year 2000. Some States have had enormous

rises, 300 percent. One of the worst States in the country is Illinois

where right now the median, the average neuro premium is

$200,000. Now I don’t know how they continue the payment, but

that is why they are leaving. They can’t stand to stay and pay it.

This is a problem across the country. It is not just a few States.

There are only seven States that we can identify that are truly stable, and I don’t think that it is an accident that these are States

that have had liability reform for virtually 30 years, like California,

New Mexico, and Louisiana, and Indiana, and Wisconsin. You

know, what is a paradox is Illinois is between Wisconsin and Indiana. They pay $200,000 on an average in Illinois. You can go across

the State line to Indiana, and you can pay $40,000, or you can go

up to Wisconsin and pay $30,000. They are the same doctors that

do the same work. Why do they have to pay so much more? Because we have a bad system, and it needs to be fixed. And it is a

national problem, and we think it needs a national solution. Everybody in every State, every citizen deserves the same chance of access to health care. We are losing it. We are losing it right now,

and it is getting worse year by year, so delay is not going to help.

Delay and debate aren’t solving the problem.

We think there is a solution. There are many proposals that we

are anxious to entertain, and though we do know there are solutions and the MICRA reforms that are in California’s bill from

1975 are proven to hold rates down. The rates across the country

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have increased at three times the amount that the rates have in

California. You know the provisions of the bill. I won’t go through

them, but I do think that it is important to consider this a national

dilemma that needs a national solution. What I think we need to

bring is fairness and balance and uniformity to the medical liability

system across the country. Full economic damages, a limit on noneconomic awards, which now are 60 percent of the award, and protect every person. We want to protect those that are medically injured, but we also want to protect every person who needs specialty

and emergency care and that they can get it near home when they

need it and where they need it.

Thank you very much.

[The prepared statement of James R. Bean, follows:]

PREPARED STATEMENT OF JAMES R. BEAN ON BEHALF OF THE ALLIANCE OF

SPECIALTY MEDICINE

Chairman Deal, Ranking Member Brown, and Members of the Subcommittee, my

name is James R. Bean, MD. I am a practicing neurosurgeon from Lexington, Kentucky, a member of the Alliance of Specialty Medicine’s Physician Advisory Council

and the current Treasurer of the American Association of Neurological Surgeons. On

behalf of the Alliance, a coalition of 13 medical societies representing 200,000 specialty physicians in the United States, I appreciate the opportunity to testify before

you today regarding the effect that our current medical litigation system is having

on patient access to healthcare.

Nearly two years ago, this subcommittee held a similar hearing to assess the need

for federal medical liability reform legislation. At that time, subcommittee members

were informed of a growing healthcare crisis that was seriously affecting patient access to care in at least twelve states. As you know, the House of Representatives

responded by passing the HEALTH act, not once, but twice. The Alliance endorsed

this legislation then, and we continue to support its passage. Unfortunately, the

Senate was unable pass this bill and Congress adjourned without solving the problem. I am sorry to inform you today, that not only has the crisis not subsided, indeed, it has worsened. According to the American Medical Association, there are

now twenty states in ‘‘full-blown’’ crisis and twenty-four states and the District of

Columbia are showing warning signs of a potential crisis Only six states—California, Colorado, Indiana, Louisiana, New Mexico, and Wisconsin—are considered

safe, and the common denominator is that they have all implemented effective medical liability reform. I therefore have the regrettable task of bringing you up-to-date

on the status of this ongoing crisis.

And it is a crisis. The media now report on a daily basis that as medical liability

insurance becomes unaffordable or unavailable, more and more doctors, especially

specialists, are no longer performing high-risk procedures, or they are being forced

to move their practices to states with stable medical liability systems, or they are

simply retiring from medical practice—leaving gaping holes in the healthcare safety

net.

Much of the ‘‘face’’ of this crisis has centered around the great difficulties that

pregnant women are having in finding obstetricians to deliver their babies, but the

simple truth is that this is a problem that potentially affects all of our citizens: the

mother whose little boy has fallen off of the jungle gym and needs an orthopaedic

surgeon to fix his broken arm; the teenager who has been in a serious car accident

and needs a neurosurgeon to treat his severe head injury; the woman who needs

a pathologist to evaluate her Pap smear to screen for cervical cancer; the elderly

man who has a poor heart and needs a cardiologist or cardiothoracic surgeon to

unblock a clogged artery or replace a failing valve; the woman who has a family

history of breast cancer and needs a radiologist to perform a mammography to make

sure she is cancer free; the business man who needs a gastroenterologist to treat

his ulcer; the man who needs a urologist to screen for prostate cancer; and for millions, a nearby emergency department that is open to avoid unnecessary delays in

getting treatment when time is of the essence.

THE MEDICAL LIABILITY CRISIS: PATIENT ACCESS TO MEDICAL CARE IS IN JEOPARDY

As the subcommittee considers the current state of this national healthcare problem, I’d like to draw your attention to a growing body of evidence that does in fact

demonstrate just how serious this crisis has become.

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Doctors are No Longer Performing Complex and High-Risk Medical Procedures

America’s women are at particular risk of losing access to vital healthcare services. The August 2003 General Accounting Office report entitled, ‘‘Medical Malpractice: Implications of Rising Premiums on Access to Health Care,’’ confirmed that

rising medical liability insurance premiums have contributed to reduced access to

obstetrical services, particularly in rural locations. According to a 2004 professional

liability survey conducted by the American College of Obstetricians and Gynecologists, ob-gyns have made a number of practice changes as a result of the medical

liability crisis:

• One in seven has stopped practicing obstetrics because of the risk of liability

claims;

• Because of the risk of liability claims or suit, 22 percent decreased the amount

of high-risk obstetric care; 14.8 percent stopped offering or performing VBACs;

9.2 percent decreased the number of deliveries; 12.3 percent decreased

gynecologic surgical procedures performed; and 5.6 percent no longer perform

major gynecologic surgery;

• Because of liability insurance costs and availability, 25.2 percent decreased the

amount of high-risk obstetric care; 12.2 percent decreased the number of deliveries; 14.8 percent decreased gynecologic surgical procedures performed; and 5.4

percent no longer perform major gynecologic surgery

Patients in need of care from surgical specialties like orthopaedics and neurosurgery are likewise affected by the crisis, as these physicians are also restricting

their practices. According to the American Association of Orthopaedic Surgeons, rising liability premiums have caused 55 percent of orthopaedic surgeons to avoid at

least some procedures due to liability concerns; 39 percent now avoid performing

spine surgery; and 6 percent have eliminated all surgery.

The American Association of Neurological Surgeons and the Congress of Neurological Surgeons report similarly alarming findings. Based on a 2004 national survey of U.S. neurosurgeons, the AANS and CNS found that over one-half of survey

respondents have limited services because of rising medical liability insurance premiums and/or increased risk of suit. Of those limiting services, 70 percent refer complex cases to other neurosurgeons; 71 percent no longer perform aneurysm surgery;

23 percent no longer treat brain tumors, 75 percent no longer operate on children;

and 34 percent no longer perform complex spine procedures. These patients are typically sent to academic medical centers or large tertiary care hospitals for treatment,

often requiring patients to travel great distances to receive neurosurgical care.

Even specialists who are not usually considered ‘‘high-risk’’ cite medical liability

pressures as the reason why they are restricting services. For example, according

to the American Urological Association, over 41 percent began referring complex

cases in the past two years and one in four no longer perform such procedures as

cystectomy (which is complete bladder removal, usually for cancer patients).

The elderly may also be particularly affected, as decreases in reimbursements for

complex medical procedures have declined to the point where Medicare no longer

even covers the cost of medical liability insurance. Specialists with a high volume

of Medicare patients, such as cardiologists and cardio-thoracic surgeons, and their

patients who need high-tech, lifesaving heart therapy, will likewise feel the effects

of the crisis.

Patient Access to Emergency and Trauma Care is at Risk

While the medical liability crisis affects patients who need many types of medical

care, access to timely and efficient emergency and trauma care services is in particular jeopardy. When patients rush to the ER, they assume the hospital will be

open and doctors will be there to treat them. However, because of the medical liability crisis, this is no longer always the case. The liability crisis is now severely

straining our nation’s already stressed emergency medical system, as patients who

have no access to doctors inevitably end up on the emergency department’s doorsteps, further exacerbating the hospital emergency department overcrowding problem.

In addition, to secure affordable medical liability insurance or to minimize their

risk of lawsuits, many physicians, including neurosurgeons, orthopaedic surgeons,

cardiothoracic surgeons, obstetricians and cardiologists are no longer serving ‘‘oncall’’ to hospital emergency departments. For example, according to a 2004 hospital

emergency department survey conducted by The Schumacher Group, three of four

emergency departments diverted ambulances in the last 12 months in part because

no specialists were available. Of these, one third diverted patients six or more times

a month and an additional 28 percent diverted patients three to five times a month.

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More than one-fourth of hospitals reported losses in specialty coverage related to a

fear of lawsuits.

The above referenced August 2003 GAO report confirmed that rising medical liability premiums have contributed to reduced access to emergency surgery services,

particularly in rural locations, because certain high risk specialists like neurosurgeons and orthopaedic surgeons are no longer serving on-call to hospital emergency departments. Over one-third of surveyed neurosurgeons have reported that

they have altered their emergency and/or trauma call coverage because of liability

concerns. Neurosurgeons across the country are now limiting the types of emergency

cases that they treat, they are limiting the hours that they serve on-call, or they

have stopped providing emergency call altogether. Twenty-one percent of

orthopaedic surgeons have likewise eliminated emergency department call.

Doctors are Moving to States with a More Favorable Medical Liability Climate

Every state that is experiencing a medical liability crisis reports that doctors are

leaving in droves in search of another location in which to practice where the medical litigation climate is more favorable. The list of states experiencing the exodus

of doctors continues to grow, and as with other elements of this crisis, specialists

are most likely to ‘‘hit the road’’ in search of a safe haven state. Pennsylvania has

been especially hard hit, and some counties no longer have any practicing

orthopaedic surgeons and 12 maternity wards closed in Philadelphia alone. Moreover, 80 percent of Pennsylvania medical students are leaving the state, instead of

staying to practice in this highly litigious area of the country. Neurosurgery’s survey

data show that nearly 19 percent of practicing neurosurgeons either plan to, or are

considering, moving their practice to another state where the medical liability costs

are relatively stable. Prior to the recent enactment of medical liability reform, Mississippi had lost 35 percent of its neurosurgeons in a two year period. Last year,

21 out of 79 neurosurgeons surveyed in Missouri stated that they were considering

leaving the state, and today, there are no longer any neurosurgeons in Southern Illinois.

Doctors, Trauma Centers and Other Medical Providers are Closing their

Doors

An even more troubling aspect of the current crisis is the fact that many physicians are simply finding it impossible to stay in practice at all, and once gone, they

are not easily replaced. In extreme cases, emergency departments and trauma centers have been forced to shut down completely because the physicians have been unable to secure medical liability insurance at any price. The GAO confirmed that the

medical liability crisis caused trauma centers to close in Florida, Mississippi, Nevada, Pennsylvania and West Virginia. The same has been true in other states, including Arizona, Maryland, Ohio and Texas. These closures are coming during a

time when the number of visits to the nation’s emergency departments climbed over

20 percent from 89.8 million in 1992 to 107.5 million in 2001.

Within the past several years, nearly 700 mammography facilities have closed nationwide. The continued and steady closing of mammography facilities throughout

the country has led to increased waiting times for women seeking both screening

mammograms and diagnostic mammograms. The longer waiting times are now on

the brink of affecting clinical outcomes for those women who must wait for a possible diagnosis of breast cancer.

Individual physicians are also retiring. In the case of neurosurgery, in 2001 alone,

327 board certified neurosurgeons retired, representing an alarming 10 percent of

the neurosurgical workforce in the United States. In addition, another 33 percent

of neurosurgeons report that they are planning to retire early. Five percent of

orthopaedic surgeons have retired earlier than they otherwise would have.

Current and future shortages of high-risk specialty physicians will increase the

magnitude of the problem. According to the American Hospital Association’s March

2003 Liability Insurance Survey, over one-half of hospitals across the country reported difficulty in recruiting physicians because of the medical liability crisis. A recent study of third and fourth-year medical students found that nearly one-half said

the current crisis was a significant factor in their specialty choice, with many future

doctors no longer choosing high-risk specialties such as ob-gyn. In the 2004 National

Resident Matching Program, the number of ob-gyn training slots filled by U.S. medical school seniors declined for the third year in a row to 65.1 percent—a decrease

of 20 percent over the past decade. The number of U.S. medical students entering

neurosurgery and emergency medicine residencies declined to 86 percent and 77.5

percent, respectively. Finally, applications to medical schools have dropped 22 percent since 1997. With an increasingly aging population, the country can ill-afford

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to lose good doctors prematurely and to have a healthcare litigation system that deters our best and brightest from choosing medicine as a career.

CAUSE OF THE CRISIS: THE CURRENT MEDICAL LITIGATION SYSTEM IS BROKEN

The root cause of this problem is quite simple: the unrestrained escalation of jury

awards and settlements, in even a small number of medical liability cases, is driving

up doctors’ liability insurance premiums and is forcing some insurance companies

out of business altogether. This problem is making it difficult, and sometimes impossible, for doctors to obtain affordable liability insurance so they can remain in practice. There is a wide body of evidence to substantiate these conclusions.

Medical Liability Awards are On the Rise

Medical liability awards have been growing steadily, and according to closed

claims data from the Physicians Insurance Association of America (PIAA), the median jury award nearly doubled from 1997 to 2003, increasing from $157,000 to

$300,000. The average award increased from $347,134 in 1997 to $430,727 in 2002.

Data collected by Jury Verdict Research (JVR), which reports statistics for a smaller

number of cases that reach the trial stage, reflects these same trends. According to

JVR, the median medical liability jury award had doubled from $500,000 in 1995

to over $1 million in 2002 and the average jury award has soared to an astonishing

$6.2 million, up from $1.8 million in 1996. Finally, the number of mega-verdicts is

also on the rise. In 1997, only two medical liability verdicts topped $20 million. In

2001 and 2002, however, seven of the top 20 awards were related to medical liability, including a $95.2 million birth injury judgment in New York. The combined

total of these seven awards was nearly $3 billion.

Overall medical liability tort costs are rapidly increasing, and far outpace the

growth in medical costs generally. For example, according to the Insurance Information Institute, from 1975 through 2000, medical liability costs have grown a whopping 1,642 percent as compared to a 449 percent increase for general medical costs.

Increased Awards and Settlements Mean Insurers are Paying Out More

than they are Collecting, Necessitating Steep Premium Increases

A June 2003 General Accounting Office (GAO) report, entitled ‘‘Medical Malpractice Insurance: Multiple Factors Have Contributed to Increased Premium

Rates,’’ confirms what we already know: increased losses on claims are the primary

contributor to higher medical liability insurance premium rates.

Indeed, according to the Insurance Information Institute, which analyzed data

from A.M. Best (an independent insurance rating agency that analyzes insurance

companies’ overall financial strength and creditworthiness), the cumulative underwriting loss for the medical liability insurance sector from 1990 to 2001 was nearly

$10 billion. This dramatic rise in medical liability awards and settlements has

meant that professional liability insurers have been paying out more than they have

been collecting in premiums. In 2002, medical liability insurance companies were

paying out $1.65 in claims for every medical liability premium dollar collected. In

2003, according to the National Underwriter Data Services, insurers were paying

approximately $1.38 for every premium dollar collected. While the ratio of payouts

to premium dollars collected has become more aligned, insurance companies are still

finding it necessary to raise physicians’ premiums to keep pace with anticipated

claims. Obviously, this situation is not sustainable, and this trend is therefore forcing insurance companies, which must set their rates based on anticipated future

losses, to steeply increase doctors’ medical liability premiums to ensure adequate reserves to pay future judgments.

As a result, over the past several years, physicians across the country have faced

double, and sometimes triple, digit rate increases. Alliance members, including highrisk specialists like neurosurgeons, orthopaedic surgeons, obstetricians,

cardiothoracic surgeons and emergency physicians, have been disproportionately affected by these premium increases. For example:

• According to one national survey of neurosurgeons, between 2000 and 2004 the

national average premium increase was 84 percent, from $44,367 to $81,749.

The median rate for neurosurgeons in Illinois is now $200,000 and in some

states, neurosurgeons’ premiums have reached nearly $400,000 per year.

• Rates for ob-gyns continue to be among the highest. According to the Medical Liability Monitor’s 2004 rate survey, in 2004, obstetricians paid $277,241 in Florida, up from $249,169 in 2003. Illinois ob-gyns received a 66.9 percent increase

in 2004, paying $230,428 as compared with $138,031 in 2003. And in Pennsylvania, premiums for ob-gyns increased 34.4 percent in 2004 to $172,178 from

$128,114 in 2003.

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• Utah orthopaedic surgeons saw medical liability rate increases of 60 percent from

2002 to 2003 and in Texas they have risen by more than 50 percent. In Pennsylvania, a survey conducted in June 2002 revealed rate increases as high as 59

percent. In other areas of the country, orthopaedic surgeons are finding that

their premiums have risen by over 100 percent, even if they have never had

a claim filed against them.

• Over the past several years, over 95 percent of emergency medicine physicians

have experienced medical liability premium increases, with approximately 69

percent facing increases between 60 to 500 percent. This is attributed to the fact

that emergency medicine physicians are almost always named in any litigation

that arises from a patient encounter that begins in the emergency department.

Since most hospital admissions now come through the emergency department,

these doctors are experiencing steep premium rises even though the lawsuits

against them may have no merit and result in either dismissal or a defendant’s

verdict.

• Even those specialists who are not in high-risk categories are affected by this upward trend in premium costs. For example, 80 percent of recently surveyed dermatologists reported that their premiums increased over the past years and

those dermatologists who were insured by a state plan were paying nearly double what their colleagues were paying in the private market.

Medical Liability Insurance is Unavailable

Not only are medical liability insurance premiums rising at astronomical rates,

but many doctors have found it increasingly difficult to obtain medical liability insurance at any price. Citing the increases in liability losses, several companies, including, St. Paul, MIXX, PHICO, Frontier Insurance Group and others, have either

recently stopped selling medical liability insurance or have gone out of business,

leaving thousands of doctors scrambling to find replacement coverage. Of the companies that have remained in the market, many are no longer renewing insurance coverage for existing policyholders and/or they are not issuing new insurance policies

to new customers. This is particularly true in states that have no effective medical

liability reform laws in place.

The June 2003 GAO report confirmed that the declining profitability of the medical liability insurance market has caused many insurers to either stop selling medical liability policies altogether or reduce the number of policies they sell, putting

even greater pressure on the remaining insurance companies to raise their premiums to cover expected losses. Alliance members have witnessed the impact of this

problem first hand. For example:

• In 2002, nearly 40 percent of orthopaedic surgeons in Pennsylvania were not able

to renew their medical liability coverage with the same carrier and 31 percent

did not find new coverage.

• In 2002, 15 percent of dermatologists experienced difficulties securing their liability insurance. In some cases, dermatologists in solo practice who have never

even been sued were forced to turn to the state for coverage because the remaining insurers in their area made a blanket decision to no longer insure solo

practice physicians, regardless of specialty.

• A recent study found that in recent years, approximately 33 percent of surveyed

neurosurgeons have switched insurance companies, and of these, 41 percent did

so because their insurance company failed or withdrew from the market. In addition, neurosurgeons in Florida have been unable to obtain medical liability insurance at any cost, forcing them to ‘‘go bare’’ or self-insure. Across the nation,

even those neurosurgeons who only have one claim against them (regardless of

the outcome of the case) are finding it difficult to find insurance coverage.

• Three of four insurance carriers with the largest market share in Missouri recently stopped writing policies in that state. This means that physicians can

often obtain a quote from only one company. For example, one group of 12 cardiologists could get only one quote with an 80 percent increase for 2003.

SCOPE OF THE CRISIS: A NATIONAL PROBLEM THAT REQUIRES A FEDERAL SOLUTION

Those who oppose federal legislation to fix this crisis cite various reasons in support of their contention that this is not a national problem that merits a federal solution. In particular, they note that the regulation of insurance and healthcare is

generally left to the states and therefore this is a matter that the states should attend to. The Alliance respectfully disagrees with these objections. Today, healthcare

delivery has no borders and it should be equal from state to state. We currently

have a patchwork of liability reforms, and because of this uneven system, access to

healthcare varies according to the liability climate of each state. Every patient,

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every citizen, in every state deserves equal protection under the law, both in compensation for negligent injury, and in timely access to healthcare, particularly emergency and specialty care. The undisputed truth is that one way or another, this

problem now touches nearly every American and a federal solution is therefore a

national imperative.

Nearly All States are Facing a Medical Liability Crisis

According to the American Medical Association, there are now twenty states in

‘‘full-blown’’ crisis: Arkansas, Connecticut, Florida, Georgia, Illinois, Kentucky, Massachusetts, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Washington, Nevada, West Virginia, and Wyoming.

Twenty-four states and the District of Columbia are showing warning signs of a potential crisis. For high-risk specialists like neurosurgeons, the situation is even more

widespread than the AMA reports, as the American Association of Neurological Surgeons and Congress of Neurological Surgeons have identified at least 22 states that

are currently facing a medical liability crisis, with another 16 facing a potential crisis.

Every American Pays the Costs of the Current Medical Litigation System

According to the U.S. Department of Health and Human Services (HHS), in its

2003 report entitled, ‘‘Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health Care,’’ the current medical

litigation system imposes enormous direct (e.g., premiums, legal fees, expenses and

payouts) and indirect costs (e.g., defensive medicine) on the health care system. In

2004, for example, 55 percent of surveyed neurosurgeons reported that they are

practicing defensive medicine and have altered their treatment protocols because of

liability concerns, including ordering more diagnostic or other tests. These costs are

passed on to all Americans in the form of increased health insurance premiums,

higher out-of-pocket medical expenses and higher taxes. The report estimates that

enacting federal medical liability legislation could save between $70-120 billion in

health care costs each year. These savings would in turn lower the cost of health

insurance and make health care more affordable and available to many more Americans.

Federal Medical Liability Reform Will Save the Federal Government Money

Each year, the Federal Government pays for the increased costs associated with

the current medical litigation system through various health care programs, including Medicare, Medicaid, Community Health Centers and other health care programs

for veterans and members of the armed forces. Citing the findings of the Department of Health and Human Services and the Congressional Budget Office’s (CBO)

cost estimate of HR 5, the HEALTH Act, the Congressional Joint Economic Committee concludes that federal medical liability reform legislation that includes a cap

on non-economic damages would generate significant fiscal savings for the Federal

Government. The combined annual budget savings attributed to decreased direct

and indirect costs would total approximately $12.1 billion to $19.5 billion. Over a

ten-year period (2004-2013), if medical liability reform legislation passed, a total of

between $67 billion and $106 billion in savings would accrue to the federal government.

States Face Significant Barriers to Implementing Medical Liability Reforms

Many states face barriers—some legal and some political—to enacting effective

medical liability reform laws. Some states, including Florida and Ohio, have enacted

medical liability reform laws, only to have their state Supreme Courts strike them

down as unconstitutional. Other states, like Arizona, Kentucky, and Pennsylvania

have explicit constitutional prohibitions on damage limits. Still others, like Montana, have not had their laws tested and reviewed by their highest court. In addition, new laws passed by Mississippi and West Virginia may also face court challenge, and it will be years before it is determined whether these laws pass state

constitutional muster. As a consequence, despite the increasing medical liability crisis in many of these states, they are essentially powerless to act to effectively solve

the problem.

SOLUTION TO THE CRISIS: MEDICAL LIABILITY REFORM LEGISLATION PATTERNED AFTER

CALIFORNIA’S MICRA

The cornerstone of any legislation should include the principles that injured patients deserve their day in court and that they are entitled to receive full, just and

fair compensation. Congress should therefore adopt medical liability reforms that

have a proven track record and will help strike the necessary balance between comVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
26

pensating injured patients and ensuring access to healthcare for all Americans. Fortunately, Congress does not need to start from scratch and identify and implement

a solution that is untested. Faced with a similar crisis in the early 1970’s, the state

of California, with bipartisan support, enacted the Medical Injury Compensation Reform Act or MICRA. The Alliance believes that any federal reform must contain the

key elements of MICRA, which include:

• Providing full compensation for all economic damages, including medical bills, lost

wages, future earnings, custodial care and rehabilitation;

• Placing a fair and reasonable limit of $250,000 (without exceptions or an inflationary adjuster) on non-economic damages, such as pain and suffering;

• Resolving claims quickly by establishing a reasonable statute of limitations for filing a lawsuit;

• Ensuring appropriate payments are there when patient need them by allowing for

periodic payments of damages rather than lump sum awards;

• Maximizing the amount of the award that goes to injured patients by placing reasonable limits on attorneys’ fees;

• Focusing liability on those at fault, not on ‘‘deep pockets,’’ by eliminating joint and

several liability; and

• Preventing double recovery of damages through collateral source reform

Congress may want to consider additional reforms (which were not included in

last-year’s House-passed version of the HEALTH Act) that would:

• Ensure that juries are advised by actual experts by establishing expert witness

standards; and

• Unclog the courts and reduce the societal costs of lawsuits by limiting frivolous

lawsuits

In addition, Congress should ensure that federal medical liability reform does not

preempt effective state reforms.

As the subcommittee moves forward with its deliberations on this legislation, the

Alliance urges you to keep in mind the following points about the effectiveness of

MICRA:

MICRA Fully Compensates Injured Patients Quickly

First and foremost, under MICRA, patients receive full compensation for legitimate injuries resulting from medical negligence. Detractors of federal reform legislation are attempting to obfuscate the facts by scaring the public and policymakers

into believing that injured patients will only receive a maximum of $250,000 to compensate them for their injuries. This is simply not the case. Patients receive full

compensation for all of their quantifiable needs, with up to an additional $250,000

for non-economic damages, such as pain and suffering. To demonstrate this fact, the

Californians Allied for Patient Protection recently compiled a sample of total awards

(including both economic and non-economic damages) provided to injured patients.

For example, in December 2002, a 5 year-old Alameda County boy with cerebral

palsy and quadriplegia because of delayed treatment of jaundice after birth was

awarded $84,250,000; a 3 year-old Contra Costa County girl with cerebral palsy as

a result of birth injury was awarded $59,317,500 in October 2002; a 30 year-old

homemaker from Los Angeles with brain damage because of lack of oxygen during

recovery from surgery, was awarded $12,558,852 in July 2002; and in November

2000, a 25 year-old San Bernardino County woman with quadriplegia because of

failure to diagnose a spinal injury was awarded $27,573,922.

Medical liability claims are also paid most quickly in California versus all other

states. According to the National Practitioner Data Bank’s 2003 Annual Report, in

2003, the mean delay between an incident that led to a payment and the payment

itself was 4.59 years. In California, it was 2.98 years. The slowest state to close

claims was Massachusetts, which was 6.19 years.

MICRA Significantly Minimizes Premium Increases

Opponents of reform cite statistics that over the past several years, premiums for

doctors in California have also been rising; thus somehow proving that MICRA does

not have any impact in holding down the costs of medical liability insurance. While

it is true that premiums are on the rise in nearly all states, including California,

the rate of increase of premiums for California doctors is significantly lower than

in other states, and over time, MICRA has, in fact, stabilized medical liability insurance premiums as compared to the rate of increase in the rest of the country. According to data from the National Association of Insurance Commissioners, from

1976 to 2002, liability premiums for California physicians rose only 245 percent as

compared with 750 percent of physicians in the rest of the United States. Data from

a survey of neurosurgeons validates these trends, and both actual premiums and the

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rate of increase for neurosurgeons in California, as compared to neurosurgeons who

practice in states where there are no reforms in place, are significantly lower.

Federal Government and Other Experts Agree that MICRA Works

U.S. Government experts and others agree that MICRA does in fact hold down

the costs of medical liability insurance, and over the years there have been a number of studies that have identified MICRA’s $250,000 cap on non-economic damages

as a critical element in stabilizing premium costs. For example, dating back to September 1993, the former U.S. Office of Technology Assessment (OTA), in a report

entitled, ‘‘Impact of Legal Reforms on Medical Malpractice Costs,’’ concluded that

caps on damages were consistently found to be an effective mechanism for lowering

medical liability insurance premiums. Most recently, the U.S. Department of Health

and Human Services, Congressional Budget Office and Joint Economic Committee

issued reports evaluating the HEALTH Act, came to the same conclusion, and the

GAO, in its August 2003 report, found that ‘‘premium growth was lower in states

with non-economic damage caps than in states with limited reforms.’’ In addition

to these government experts, others have studied the effectiveness of MICRA. A

2004 study by the RAND Corporation, entitled ‘‘Capping Non-Economic Awards in

Medical Malpractice Trials’’ concluded that MICRA’s contingency fee reform and

limit on noneconomic damages has decreased insurer payouts and redistributed

more money from personal injury attorneys to injured patients. Finally, according

to Kenneth Thorpe, in a study published in the January 2004 edition of Health Affairs, insurance premiums are 17 percent lower in states with caps on noneconomic

damages and they are one-quarter lower in states with both caps on noneconomic

damages and discretionary collateral offsets.

States with Damage Caps Have More Doctors Available to Treat Patients

Opponents of medical liability reform cite various statistics to claim that tort reforms, especially caps on damages, have had no affect on stemming the tide of this

crisis. In addition, in its August 2003 Report, the GAO asserts that its analysis of

medical licensure data proves that not only are physicians not moving or retiring

as a result of increased medical liability premiums, but in the crisis states it reviewed there actually was an increase in the number of licensed physicians. The Alliance takes issue with these claims for several reasons:

• Medical licensure data is in no way indicative of the number of physicians who

are actually practicing medicine in a particular state. Rather, it merely means

that a certain number of physicians hold a license to practice medicine. Physicians tend to hold multiple state licenses and typically retain their licenses

when they relocate or retire from active practice. Thus, taken alone, medical licensure data provides no useful information to prove or disprove the affects of

the medical liability crisis on physician supply.

• According to a July 2003 study conducted by the U.S. Department of Health and

Human Services’ Agency for Healthcare Research and Quality, entitled ‘‘The

Impact of State Laws Limiting Malpractice Awards on the Geographic Distribution of Physicians,’’ states that have enacted laws capping damage payments in

medical liability cases have more physicians per capita than those who have no

cap or very high damage caps. The study found that in 1970, before any states

had a law capping damage payments, in all states there were virtually identical

levels of physicians per 100,000 citizens. Thirty years later in 2000, however,

states that had adopted a cap averaged 135 physicians per 100,000 citizens,

while states without caps averaged 120.

• The May 2003 Joint Economic Committee study concluded that ‘‘the number of

doctors at the state level is sensitive to the malpractice insurance costs: higher

premiums reduce the number of practicing physicians.’’

The clear and simple truth is that MICRA and other similar laws work. For nearly three decades, this law has ensured that legitimately injured patients get unfettered access to the courts and receive full compensation for their injuries, while at

the same time providing stability to the medical liability insurance market to ensure

that doctors can remain available to care for their patients.

Americans Overwhelmingly Support a MICRA-Style Solution

Americans are becoming acutely aware of the impact this crisis is having on the

nation’s healthcare system and the care they receive. Studies show that they overwhelmingly favor passage of federal legislation to reform the current medical liability system and create a system that balances the rights of patients to obtain appropriate compensation for injuries caused by medical negligence with the rights of all

citizens to have access to medical care. A March 2004 poll conducted by Wirthlin

Worldwide for the Health Coalition on Liability and Access found that:

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• 82 percent of the Americans surveyed believe that doctors are being forced to

leave their practices because excessive litigation has put the cost of medical liability insurance out of reach.

• By a huge margin, 72 percent of those surveyed said that health care expenses

for all people are being driven up by the rising cost of medical liability lawsuits.

• The high number of medical liability lawsuits is unjustified, according to 55 percent of the survey respondents. Only 16 percent say that the number of lawsuits

against health care providers is lower than justified.

• Three-quarters of Americans want Congress to pass reforms to fix the medical liability crisis. 72 percent favor a law that guarantees full payment for lost wages

and medical expenses but limits non-economic damages; 73 percent want to

limit the amount of money personal injury trial lawyers can get from the excessive litigation settlements their clients receive.

A January 2005 poll conducted by Public Opinion Strategies for the American College of Emergency Physicians reached similar conclusions, confirming that three out

of four (75 percent) of Americans recognize the current system interferes with physicians’ ability to provide quality care; 85 percent of Americans believe the current

legal system—with no consequences for pursuing frivolous lawsuits and publicity

about large monetary awards—is responsible for rising medical insurance costs; and

73 percent favor liability reform that includes placing limits on non-economic (pain

an suffering) damages.

WITHOUT REFORM THE STATE OF AMERICA’S HEALTH NOW AND IN THE FUTURE IS AT

RISK

Clearly the health of our nation’s citizens is at considerable risk. Because of the

medical liability crisis, more and more people are finding it difficult to get the specialized medical attention they need, when they need it. This is causing a national

health care emergency. Thus:

• When patients can’t find a specialist close to home, they must sometimes travel

great distances, often going out of state, to get their medical care.

• When fewer specialists are available, hospital emergency departments and trauma centers must shut their doors, and patients with emergency medical conditions lose critical life-saving time searching for an available emergency room.

• When specialists stop performing high-risk medical services, patients are often referred to academic medical centers, and these medical facilities are already

overburdened and are ill equipped to handle the increase in patient volume.

• When specialists retire at an early age, the looming shortage of doctors is accelerated, which, if left unchecked will place additional burdens on the health care

system as the population ages and requires more medical care from an increasingly shrinking pool of practicing doctors. Once gone, these doctors are hard to

replace, and those states currently facing a medical liability crisis are having

a difficult time recruiting new physicians to their communities adding to the

shortage of doctors in many parts of the country.

• When the practice of medicine becomes so uninviting, fewer and fewer of our nation’s best and brightest will want to become doctors, thus jeopardizing our

country’s status as one of the finest healthcare systems in the world.

We have reached a very important juncture in the evolution of the U.S. healthcare

system. At a time when lifesaving scientific advances are being made in nearly

every area of healthcare, patients across the country are facing a situation in which

access to health care is in imperiled. Thus, as the Congress deliberates the many

facets of this issue, the Alliance urges you to continue to keep in mind that this

issue is not about doctors, lawyers and insurance companies. Rather, it is about patients and their ability to continue to receive timely and consistent access to quality

medical care. By reforming the medical litigation system, the crisis will ultimately

be abated. Patients are calling for reform. Doctors are calling for reform. President

Bush is calling for reform. The Alliance is hopeful that the Congress’s continued efforts to highlight and debate this crisis will lead to the passage of MICRA-style

medical liability reform legislation so all Americans are able to find a doctor when

they most need one. Ultimately, when the question ‘‘Will your doctor be there?’’ is

asked, the answer must be an unqualified yes.

Thank you for considering our comments and recommendations. The Alliance of

Specialty Medicine, whose mission is to improve access to quality medical care for

all Americans through the unified voice of specialty physicians promoting sound federal policy, stands ready to assist you on this and other important health care policy

issues facing our Nation.

29

THE MANY FACES OF THE MEDICAL LIABILITY CRISIS

Arizona

Ob-gyn: Deborah Wilson made the tough decision to stop delivering babies in

June 2003. ‘‘It was a really tough decision. I just knew I couldn’t do it anymore once

I realized the risks. You’ve just got a target on your back.’’ Dr. Wilson delivered approximately 50 babies a month for over 17 years. One of the many patients forced

to find a new obstetrician was Patty Jasinski, who was seven months pregnant with

her second set of twins at the time. Dr. Wilson was Jasinski’s obstetrician for nearly

two decades, helping her through five miscarriages, an ectopic pregnancy and the

birth of her first set of twins. (East Valley Tribune, April 2004)

Neurosurgeon: Timothy Putty, MD writes: ‘‘A 60ish year old man presented to

St. Joseph’s Emergency Dept. with a cerebral hemorrhage. The ED physician tried

to find a neurosurgeon to care for this patient. None of the neurosurgeons that go

to that particular hospital was available or on call. The ED physician tried to transfer to another hospital in Tucson, but none had neurosurgical coverage that evening,

and the University Hospital was full (on diversion). This patient was subsequently

flown out of the city, to San Diego, and I believe ultimately died’’ (American Association of Neurological Surgeons/Congress of Neurological Surgeons 2004)

Florida

Neurosurgeon; Mildred McRoy suffered a hemorrhagic stroke in February and

was rushed to JFK Medical Center in Atlantis, Florida for treatment. However, JFK

stopped providing around-the-clock neurosurgical coverage in July because of the

medical liability crisis. In fact, there wasn’t a single neurosurgeon on call in all of

Palm Beach County. Ms. McRoy was transported 40-miles away to North Broward

Medical Center more than eight hours later. She was operated on by neurosurgeon

Gary Gieseke, but died after being in a coma for several days. Almost all of the neurosurgeons at the hospital are ‘‘bare’’ and are not willing to take on the risk of emergency procedures without insurance. The hospital has begun paying for on-call services in an effort to provide the necessary 24/7 coverage. (Palm Beach Post, March

6 and 18, 2004)

Orthopaedic surgeon; Diana Carr, MD writes: ‘‘In my community only two

orthopaedists (including myself) of the five will see children. My practice is limited

to pediatric upper extremity. The other pediatric orthopaedic surgeon is on call in

rotation with the three others who do no pediatrics. The 75-percent of the time he

is not on call, children have to go to Tampa, Orlando or St. Petersburg where pediatric orthopaedists are available. This is a two-hour ride each way for the initial

appointment and all follow-ups.’’ (American Association of Orthopaedic Surgeons)

Ob-gyn; Manatee Obstetrics & Gynecology physicians will end obstetrical services

at the practice September 2004 due to rising medical liability costs, leaving hundreds of expectant mothers to find a new baby doctor this fall. State Rep. Bill

Galvano, R-Bradenton, is an immediate victim of this escalating crisis. His pregnant

wife, Julie, was scheduled to deliver their third child at Manatee in October. (Bradenton Herald, April 15, 2004

Georgia

Ob-gyn; In 2003 there were three obstetricians in Eastman, Georgia. Today there

is one. One moved out-of-state and the other 42-year old doctor quit obstetrics.

(Medical Association of Georgia, 2004); Dr. Patricia Ritchie Haynes recently quit her

23-year ob-gyn practice at Piedmont Hospital after learning her malpractice premium was going to rise by 50 percent in one year. (Atlanta Journal-Constitution,

Feb. 8, 2004); The Athens Women’s clinic, which has offered obstetrics services for

35 years, announced May 21 that the state’s medical liability crisis was forcing it

to no longer deliver babies. It will continue to offer gynecological services. (Athens

Banner-Herald, May 21, 2004)

Emergency Physicians; ‘‘At my hospital in Atlanta, GA, the surgeons (including

orthopedists) decided that due to... skyrocketing premiums, they would work less

call, leaving us for several months with every third day with surgeons and

orthopaedics on call. My hospital is the designated site for Hartsfield Airport, the

busiest airport in the nation. Multiple patients have had to be transferred and a

colleague had a stabbing that had a significant delay in care due to lack of coverage.’’ (American College of Emergency Physicians, 2005)

Neurosurgeon; Last year there were four neurosurgeons in Albany, Georgia and

the local hospital had neurosurgical trauma coverage 24 hours a day, seven days

a week. Today there are two and the hospital only has a neurosurgeon on-call 50

percent of the time. If area residents suffer a head or spinal injury, stroke or other

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neurosurgical emergency on the ‘‘wrong day’’ they must be air-lifted to Macon or Columbus, if a neurosurgeon is available there. (Medical Association of Georgia, 2004)

Illinois

Neurosurgeon; In February 2004, 85-year-old retired machinist Fred Andricks

tripped and hit his head. Because of the medical liability crisis there are no neurosurgeons left in Belleville. After a delay, Mr. Andricks was transferred to a St.

Louis, MO medical center where he received treatment. Unfortunately he died the

next day from swelling of the brain. After learning of her father’s fate, Lisa Kasten

said ‘‘All the talk was that this was going to happen and that someone would not

get care when they needed it. I just never realize it would be my dad.’’ (American

Association of Neurological Surgeons/Congress of Neurological Surgeons 2004)

Emergency Physician; In August 2004, a cable snapped when Richard Rhodes

was unloading his stock car into a garage, injuring his hand. He was rushed to the

Alton Memorial Hospital emergency room with his thumb and little finger missing.

There were no doctors at the hospital available to reattach his fingers. The emergency room physician called more than six hospitals in an effort to transfer Mr.

Rhodes, but no other hospitals or accepting transfers for this type of injury. After

several hours, Mr. Rhodes was airlifted to a hospital in Springfield and his fingers

were reattached. Unfortunately because of the delay, the reattachment did not take

and his thumb had to be amputated two weeks later. Mr. Rhodes blames the loss

of his thumb on the medical liability crisis in Illinois. Mr. Rhodes said, ‘‘The doctor

did everything he could to find someone to help. I kept saying that I had insurance.

But what’s a sense of having insurance if you can’t find anyone to work on you?’’

(The Telegraph, August 2004)

Urologist; Roger Rives MD and David Didomenico are the only two urologists

and Sarah Bush Lincoln Health Center in Mattoon. In an effort to reduce their professional liability risks, they have stopped performing more risky, highly invasive

procedures, including prostate and bladder surgery. They have tried to recruit a

third urologist for more than 18 months, but have been unsuccessful. (The Journal

Gazette and Times-Courier, August 2004)

Orthopaedic Surgeon; ‘‘A five-year-old child was struck by an auto in

Naperville and sustained a fracture of the femur and a small skull fracture with

minimal underlying brain contusion. Such injuries would typical be treated by urgent casting by an orthopaedic surgeon and then a neurosurgeon would follow along

to make sure the patient’s brain injury remained stable. In this case, the neurosurgeon on call will not see any patient under 18. A pediatric orthopaedic surgeon

was in attendance, waiting to treat the femur fracture, but without a neurosurgeon

to follow the patient, transfer to Loyola had to be arranged. At Loyola, no pediatric

orthopaedic surgeon was available, so the adult orthopaedic trauma surgeon had the

child’s leg placed in traction, inserting a pin just above the knee in order to hang

the weights which pulled on the leg. The plan was to keep the child in traction for

a few weeks, and then place the child in the cast. The family, after 2 days at Loyola,

desired transfer of care back to their home town. The child was taken out of traction, placed in an ambulance, and transferred back to Edward Hospital in

Naperville. He was eventually casted and sent home. The liability crisis has created

a situation where this patient had to endure two useless ambulance rides with a

broken femur, several extra days of hospitalization, and insertion and removal of

a traction pin. This waste of resources and interference with medical care is repeated endlessly across the nation.’’ (American Association of Orthopaedic Surgeons)

Ob-gyn; Kim Dahlem, a mother of one, wants to have another baby next year,

but she has a problem: She must find a doctor who will deliver it. The obstetriciangynecologist who delivered her daughter in February 2003 recently decided, after 30

years in practice, to stop delivering babies because he could not afford the high cost

of medical malpractice insurance. Dahlem, 32, does not live in Joliet or southern Illinois, areas reported to have lost many obstetricians because of the skyrocketing cost

of professional liability insurance. She lives in northwest suburban Cary, and her

gynecologist, Dr. Donald DeDonato, practices in Arlington Heights. ‘‘It’s heartbreak,’’

Dahlem said of losing the physician who helped her through a difficult first pregnancy. ‘‘He was a blessing . . . I was comfortable with him. It’s hard having that

ripped from you.’’ (Chicago Tribune, September 22, 2004)

Kentucky

Ob-Gyn; Cynthiana doctor Greg Cooper was forced to give up delivering babies

after 23 years of practice because of rising medical liability costs. Beth Lisak, Dr.

Cooper’s secretary, was forced to find a new ob-gyn when she was seven months

pregnant because the doctor could no longer deliver her baby. (The Courier-Journal,

October 17, 2004)

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Mississippi

Emergency physician; According to an emergency physician from Jefferson

City, their practice had never had a physician leave until the last 2 years when they

lost four. Two went to states with lower malpractice insurance rates, one went to

work at an urgent care center because it has lower malpractice rates and one left

clinical medicine altogether. (American College of Emergency Physicians, 2005)

Neurosurgeon; Mississippi surgeon John Lucas, III, MD, related that his son

was in a car accident and needed immediate neurosurgical intervention, but the

area’s neurosurgeons had already either quit doing head trauma cases or had moved

away. His son had a correctible problem if immediate attention by a neurosurgeon

could be given. Dr. Lucas did everything he could to expedite the transfer and find

a neurosurgeon. Unfortunately, the transfer came too late and his son John Lucas,

IV died. (American Medical Association, 2004)

Missouri

Orthopaedic Surgeon; Poplar Bluff internist Donald Piland said, ‘‘Last year a

patient of mine fell on the ice during the winter and suffered a compound fracture

of the lower leg. Subsequently, she lost her leg due to a lack of orthopaedic coverage

in our community. We had recently lost three orthopaedic surgeons in a span of one

year, partly because they couldn’t afford malpractice insurance premiums in the

state of Missouri.’’ (Daily American Republic, March 17, 2004)

Neurosurgeon; Robert Grubb in St. Louis, Missouri wrote ‘‘I recently received

a patient in a transfer from a small town in northeast Arkansas with a severe cervical spinal injury following a motor vehicle accident. The primary care physician

said he called 17 different hospitals closer than St. Louis over a 24-hour period and

could not find anyone to take the patient because no one had an available neurosurgeon. The patient was finally transferred to Barnes Jewish Hospital in St. Louis

after more than 24-hours, way beyond the optimal time for treating such a devastating injury.’’ (American Association of Neurological Surgeons/Congress of Neurological Surgeons, 2004)

New Jersey

Neurosurgeon; Mark McLaughlin writes, ‘‘I recently saw a patient from about

50 miles away who had been progressively going quadriplegic because no neurosurgeon would take on her highly risky upper cervical compression for liability reasons. By the time I saw her she was permanently disabled and did not make a good

recovery.’’ (American Association of Neurological Surgeons/Congress of Neurological

Surgeons, 2004)

Thoracic Surgeon; Dr. John A. Heim, a cardiovascular thoracic surgeon from

Cherry Hill, was forced to close his practice and move when his medical liability

coverage increased from $190,000 this year and from $80,000 the year before. ‘‘I

spent four years in medical school, eight years training after that, 10 years in the

community doing expert surgery, and it really doesn’t mean anything because if I

don’t get affordable medical malpractice insurance I [can’t practice],’’ he said. (Asbury Park Press, March 20, 2003)

North Carolina

Ob-gyn; Dr. Mary-Emma Beres stopped delivering babies after her premiums increased from $17,500 to $60,000, leaving only one doctor in all of Allegheny County

who can perform Caesarean sections. (Raleigh News & Observer, March 30, 2003)

Neurosurgeon; Mark Lyerly, states that ‘‘In the past 10 months, numerous patients with intracranial hemorrhage or head injuries have been transferred out of

our hospital ER because there is only neurosurgical ER coverage 14 days a month.

Unfortunately, better outcomes would have been seen if patients were treated locally instead receiving delayed treatments hours later. The ER had 24/7

neurosurgical coverage, but we had to cut back because our professional liability

premiums have almost doubled in the past three years even after cutting our coverage from $3/$5 million to $1/$3 million.’’ (American Association of Neurological

Surgeons/Congress of Neurological Surgeons, 2004)

Ohio

Ob-gyn; Over the course of her pregnancy, Sharon Minson of northeast Ohio had

four different ob-gyns because rising professional liability insurance rates kept forcing her doctors to stop delivering babies. ‘‘When you’re pregnant, it should be a

happy time,’’ she said. ‘‘I just wanted continuity of care. You can’t switch around

like that.’’ In the past two years, 46 of 72 ob-gyns have left Summit County in the

past two years and more than 190 doctors have left Summit, Medina and Portage

counties in that time frame. (Akron Beacon-Journal, October 21, 2004)

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Gastroenterologist; In July Cleveland gastroenterologist Gary Gottlieb of

Mayfield Heights announced he was leaving Ohio after receiving a professional liability premium bill for $85,000, more than five times the amount he paid in 2002.

Dr. Gottlieb will move to Arizona. In Arizona Dr. Gottlieb will pay between $5,000

and $12,000 for insurance. Dr. Gottlieb’s partners have been unable to replace them.

All of the gastroenterology fellows at The Cleveland Clinic have decided to leave

Ohio to pursuit their careers elsewhere because of the high malpractice rates in

Northeast Ohio (Cleveland Jewish News, July 2004)

Neurosurgeon; Thomas Hawk of Columbus has stopped providing trauma and

emergency call in an effort to reduce his liability premiums. He also writes, ‘‘I see

lots of patients each week from West Virginia who cannot find neurosurgical care

and are coming all the way to Columbus, Ohio to get care.’’ (American Association

of Neurological Surgeons/Congress of Neurological Surgeons)

Pennsylvania

Orthopaedic surgeon; Shawn Hennigan, MD, recently moved from Pennsylvania to Wisconsin solely because of the medical liability crisis in Pennsylvania.

(American Association of Orthopaedic Surgeons, 2004); David Yanoff, who has offices in Lehighton, Palmerton and Tamaqua, Pennsylvania, is closing up his practice

and moving to Idaho because of skyrocketing professional liability premiums. Yanoff

founded Mahoning Valley Orthopedics 16 years ago. (The Morning Call, February

21, 2004)

Neurosurgery; In 2004, a 17-year old boy suffering a head injury in a car accident in Chester County, Pennsylvania died after no neurosurgeon could be found to

treat his injury. The boy was originally taken to Brandywine Hospital, which lost

all of its neurosurgeons because of the medical liability crisis. Hours later, he was

transferred to Crozier-Chester Medical Center in Delaware County, but his brain

had already begun to swell and nothing could be done. (The Morning Call, November 28, 2004)

Neurosurgeon; Recently, in Pottstown a 20 year old fell down a flight of stairs.

He sustained significant head trauma. Several years ago he would have been taken

to Pottstown Memorial Hospital where two full time neurosurgeons were on staff.

At this time, though, since no local neurosurgeons were available, he had to go to

Lehigh Valley Hospital. Because of inclement weather it was not possible to fly him

by helicopter. He was, therefore, placed in an ambulance and arrived at Lehigh approximately an hour later. Within ten to fifteen minutes of arriving at Lehigh Valley

he was in the OR but died there of a massive bleed. I do not know if it would have

made a difference if this patient had been treated sooner but I surely know he had

no chance with the situation as it now exists. (pamedicalcrisis.com, Volume II, Issue

No 5)

Tennessee

Neurosurgeon Rick Boop of Memphis writes, ‘‘I have seen three children die

recently of shunt malfunctions in ERs without a neurosurgeon who can perform

procedures on children. All neurosurgeons can provide a simple shunt revision, but

many are being forced to drop their pediatric privileges in order to obtain or reduce

their liability premiums. All three of these children died while awaiting helicopter

transport to a children’s hospital.’’ (American Association of Neurological Surgeons/

Congress of Neurological Surgeons, 2004)

Texas

Ob-gyn; Ken First, MD, and orthopaedic surgeon writes, ‘‘My wife was an ob/gyn

for 15 years. She had one legal case that was dropped in her entire career. She delivered a great many babies. Several years ago, my wife gave up obstetrics because

the malpractice premiums were so high. She then practiced just gynecology surgery

and primary care. The insurance rates were still high, and she was forced to retire

leaving a ton of women without their doctor. She gave up her medical career to sell

Mary Kay cosmetics. She works fewer hours and is already making a solid income

without the liability.’’ (American Association of Orthopaedic Surgeons, 2004)

Emergency physician; An emergency physician who was chairman of the hospital’s Emergency Department for over 10 years, quit medicine less than a year ago

because of the exorbitant liability premium rates in Texas. Another left the ER because of the medical liability situation, noting that ‘‘I feel like I’ve—wasted a residency and a lot of my life.’’ (American College of Emergency Physicians, 2005)

Ob-gyn; Two Dallas doctors, with over 40 years combined experience, quit obstetrics in 2004 due to high medical liability insurance premiums, leaving only 9 obgyns in the area. (Fellow communication to the American College of Obstetricians

and Gynecologists, 2004).

33

Neurosurgeon; Houston neurosurgeon Bruce Ehni writes ‘‘We are the recipient

of much more serious and risky cases that would have otherwise been cared for locally. Here at our hospital in Houston we are receiving hemorrhages, traumas and

other dire emergencies from as far away as El Paso and Brownsville—sometimes up

to 600 miles or more! Some of these cases include: a patient with head trauma and

a blown pupil flown in from Harlington (400 miles away); an aneuryrmal hemorrhage with intracranial hemorrhage flown in from Laredo (300 miles away); and a

brain tumor causing abrupt paralysis flown in from San Antonio (200 miles away).

All of these communities have neurosurgeons. The ‘‘bad’’ cases end up in Houston

despite the presence of neurosurgeons locally because everyone is trying to avoid

being sued. It is bad for patients and bad for us. We are being dumped on endlessly.’’ (American Association of Neurological Surgeons/Congress of Neurological

Surgeons, 2004)

Washington

Emergency physician; Dr. Paul Casey, Chief, Emergency Medicine, Chief of

Staff, Providence Campus, President-elect, Washington Chapter, American College

of Emergency Physicians wrote in a letter to Senator Patty Murray, ‘‘After significant soul searching, I have decided to leave the state I love, my friends and colleagues and the patients I enjoy caring for... providing quality care for our patients

is becoming unbearingly difficult, if not impossible in some instances. Emergency

physicians can no longer afford to bear the financial brunt of a failing health care

system.’’ (Excerpts from a letter to Senator Patty Murray, 2004, Washington State

Medical Association)

Neurosurgeon; Patient Wendy Piscopo, a lifelong Democrat, testified before the

Washington State House of Representatives Judiciary Committee on February 26,

2004. She said the following: ‘‘I once again require surgery in the same area of my

back, but the wonderful neurosurgeon I had found after a long search decided suddenly to retire, just days before I was to schedule my surgery. Due to the skyrocketing cost of malpractice insurance, he decided to retire rather than to cave in

to the system. It is hard for a Medicare patient to find a doctor she trusts, who will

not rush her surgery because he has to treat as many patients as he can in a day

to pay his insurance premiums . . . I lost so much when I lost Dr. Souri. I lost a lot

of my energy. It took me a year to find Dr. Souri—a long time to sit in pain. I lost

faith in the party I voted for—I thought the Democrats were here to fight for the

voiceless. And now I must start again looking for a surgeon I trust, one who will

see me as a person and not just another welfare case to rush out of the office. I

implore you to pass a limit on the non-economic damages in medical malpractice

lawsuits.’’

Ob-gyn; Dr. Gregary Blackner, Olympia family practitioner, stopped delivering

babies January 1, 2003 facing a 40 percent increase in insurance rates. ‘‘I had patients sitting in my office, sobbing over it. I had delivered their first three or four

kids, and now I can’t deliver their new one. They couldn’t understand.’’ (The Olympian, 5/13/03)

Wyoming

Ob-gyn; Dr. Bert Wagner will no longer deliver babies due to the increasing liability crisis in Wyoming. Dr. Willard Woods had to give up the obstetrical portion

of his practice because he could no longer get liability coverage...the remaining doctors are on call every other night. Some pregnant women are faced with driving 70

miles to get obstetrical care. He had delivered more than 1,000 babies, including the

entire starting rosters of 2 local high school basketball teams. (Wyoming Medical

Society)

Mr. DEAL. Thank you very much, Doctor.

Mr. Huggins.

STATEMENT OF MONTY HUGGINS

Mr. HUGGINS. Mr. Chairman and members of the subcommittee,

I also want to thank you for inviting us here today. This is—I will

try to get through this. I have only shared this a few times. It is

very personal with me.

My name is Monty Huggins, and I am from Knoxville, Tennessee. I was born and raised in the Florida Panhandle. Myself, my

wife, and our families have been active Republicans my whole life,

34

and have believed in the platform that we have stood for for so

many years, and that is up until now.

I am here today, because I am concerned that Congress is trying

to take away my rights and the rights of people like me, because

my wife, Janice, suffered a heart attack and passed away in my

arms on September 25 this past fall. She had been taking Vioxx

for a little over a month prior to the death, and she was in perfect

health with—39 years old. She was in great shape, no history of

heart problems in her family, and she didn’t smoke, drink, and

wasn’t overweight in the slightest. And I want to show a picture

here, a picture of her. And she was prescribed Vioxx by her doctors

that she had—because she had early onset of arthritis and had

been taking the drug for about a month, right up until her death.

Janet was involved with her work. She worked for our government. She was a project scheduler on large projects, like the Cleveland Brown Stadium and currently working on a project, a $350

million project with the Department of Energy. She enjoyed her

work a lot, took a lot of pride in it, and was great with her coworkers.

Personally, on a personal basis, Janet loved hiking, cooking, and

doing other family activities and a graduate of the Indiana University. Anything she could do to spend more time with me or her son

was definitely her top priority. Janet also had, and both of us had,

a close relationship with God and was involved in various ministries and projects for the inner city. We originally met through

a church ministry and just celebrated our 1-year anniversary in

Gatlinburg, Tennessee the week before she died.

My wife was an amazing human being. She was a wonderful

mother to her 9-year-old son, and we miss her very much. Her

death, as you can imagine, has impacted our lives, especially for

me after waiting 39 years to find the love of my life and to be taken

away senselessly. Elijah, her son, will grow up without the love

and tenderness of his mom and the advice of her. And he will not

get to enjoy the pleasures and benefits of having her be there for

his graduation, marriage, and grandkids. The morning I was getting ready for her funeral is the morning that they actually pulled

Vioxx off the market. I was putting my jacket on when my sister

came into the room and said that she had just heard on the news.

At that point, we really had not put the two and two together, but

we were fishing for answers. And of course, the autopsy later on

revealed that she did die of a blood clot in her left artery.

This medicine that our doctor gave her basically was given to her

to make her feel better, and the medicine was supposed to ease the

pain. And if they had pulled this drug off the market just 6 to 8

weeks earlier I really believe, with all of my heart, my wife would

still be here.

The proposed medical malpractice bill supported by the President

will protect, I believe, the makers and the drug companies. Why do

we want to protect companies that have knowingly killed, you

know, people, and especially at a time that we know that our own

government, the FDA, is doing a lousy job of protecting us from

these drugs?

When I heard about the guy from the FDA talking to the Senate,

it really made me angry. The way I understand it, he is one of the

35

top safety officials who approve drugs for the government. He is

one of the top safety guys telling the Senate that he and everyone

else at the FDA can’t do one thing to protect the American people

from medicines that can kill you.

Our own government is to—is here to protect us, and now that

we want to give companies like Merck a free ride and protect them

from accountability. And that is so important to me is holding them

accountable for what is going on. People need to know about this.

Because my wife is not the only one who has died from Vioxx, I

could have potentially killed thousands—it could have potentially

killed thousands of others, too.

If I may have a few more minutes.

Mr. DEAL. I am sorry that time is up. Could you summarize very

quickly for us?

Mr. HUGGINS. Yes, sir.

The pharmaceutical companies—they should be held accountable,

especially for my wife’s death and others to come. This proposed

bill would prohibit anyone from punishing drug companies for their

bad conduct. There has to be a deterrent. And as far as I am concerned, Merck took my wife away from me.

And that is all I have got to say.

[The prepared statement of Monty Huggins follows:]

PREPARED STATEMENT OF MONTY HUGGINS

Mr. Chairman and Members of the Subcommittee: Thank you for inviting me to

testify before you today. My name is Monty Huggins and I’m from Knoxville, Tennessee. I was born and raised in the Florida Panhandle. I’m a life-long, active Republican, having believed in the platform we have stood for, for many years, that

is, until now. I’m here today because I’m concerned that Congress is trying to take

away the rights of people like me. You see my wife Janet suffered a sudden heart

attack and passed away on September 25, 2004. She had been taking Vioxx for

about one month prior to her death and she was only 39 years old.

She was in great shape and had no history of heart problems. She didn’t smoke

and she wasn’t overweight in the slightest. She was proscribed Vioxx by her doctors

because she had an early onset of rheumatoid arthritis and had been taking the

drug for one month, right up until her death.

Janet was very involved in her work. She was project scheduler on large con- tracting projects like the Cleveland Brown Stadium and a $350 million project with

the Department of Energy. She enjoyed her job very much and took pride in the

projects that she worked on.

Personally, Janet loved hiking, cooking and doing other family activities. Anything she could do to spend more time with me and our son was always her top

priority. Janet also had a very close relationship with God and was involved in a

variety of church activities and projects for the needy. We originally met through

a church ministry and had just celebrated our one-year anniversary in Gatlinburg

the weekend before she died.

My wife was an amazing human being and a wonderful mother to her 9-year-old

son. We both miss her very much. Her death has impacted our lives in so many

ways. Elijah, her son, will grow up without the love, tenderness, and advice of his

mom. He will not get to enjoy the pleasures and benefits of having her there for

his graduations, marriage and grandkids. The morning I was getting ready for her

funeral is the morning they pulled Vioxx from the market. This was medicine that

our doctor gave her to make her feel better. Medicine that was supposed to heal

her. If they had pulled this deadly drug from the market even six to eight weeks

earlier, my wife would still be alive today.

The proposed medical malpractice bill supported by the President will protect the

makers of drugs like Vioxx. Why do we want to protect companies that may have

knowingly killed people? Especially at a time when we know that our own government is doing a lousy job of protecting us from dangerous drugs.

When I heard about that guy from the Food and Drug Administration talking to

the Senate it made me extremely angry. The way I understand it he’s one of the

top safety officials who approves drugs for the government. Here’s one of the top

36

safety guys telling the Senate that he and everyone else at the FDA can’t do one

thing to protect the American people from medicines that can kill you.

Our own government can’t protect us and now they want to give companies like

Merck a free ride and protect them from accountability? People need to know about

this. Because my wife is not the only one who has died from Vioxx—it could have

potentially killed thousands of others too.

I am not here before you just for me. I am here representing the tens of thousands

that have been affected by this drug and more importantly to help make sure that

we don’t have another Vioxx. A defective drug does not discriminate. This affects

everyone in this room. We all take prescription drugs for various ailments and over

the last several years we have seen the failure of the FDA to protect us. There must

be deterrents to make sure that pharmaceutical companies do not knowingly put defective drugs on the market all in the name of profits.

This just isn’t right. We depend on our government to protect us from things like

this. And now that they can’t do anything to get dangerous medicines off the market, it’s just plain wrong to give the big drug companies this kind of legal protection.

These pharmaceutical companies should be held accountable if their drug caused

my wife’s death and the deaths of others and not be allowed to escape responsibility.

This proposed bill would prohibit anyone from punishing drug companies for bad

conduct.

As far as I’m concerned Merck took my wife away from me. They should be punished—not let off the hook.

Thank you for allowing me to be here today.

Mr. DEAL. We thank you, Mr. Huggins, and we certainly extend

our sympathy to you for your loss.

Ms. Campbell, you are recognized for 5 minutes.

STATEMENT OF SHERRIE CAMPBELL

Ms. CAMPBELL. Thank you, Chairman Deal, Ranking Member

Brown, members of the committee, for the opportunity to share my

story.

I almost didn’t make it here today, because, while I was arriving

at the Atlanta airport yesterday, my father was in Crawford Long

Hospital having emergency open-heart surgery. When I asked my

tearful mother if I should stay, she literally said, ‘‘No, go up there

and take care of the doctors so they can take care of us.’’

My name is Sherrie Campbell, and I live in Watkinsville, near

Athens, Georgia. I am honored to be here today to speak with you

about an issue that directly affected me and my family, the loss of

my ob-gyn. Women and gynecologists have a special relationship.

She is the person in whom a woman trusts so many of her health

care needs, and in some cases, even her chances for survival. It is

often a unique and long-term relationship, one that can last

through many stages of a woman’s life, including the most joyous

occasions.

On January 15, 2004, I was sitting in an examination room waiting on my gynecologist, who has been my doctor for the last 10

years. I wanted to schedule a tubal ligation, because I had turned

40 a couple of weeks earlier. I was in for a shock when my gynecologist, Dr. Cindy Mercer, breezed in and said, ‘‘Good news; your

pregnancy test is positive.’’ I was advised to have extra tests to ensure everything was normal, because of my advanced maternal age.

And I was pleased to have a wonderful team taking care of me, including Dr. Mercer, as well as the ob nurses and techs.

I trusted these women with my health and my baby’s life. I had

read about the difficulty obs were having in paying for liability insurance, in some cases paying six-figure insurance premiums. And

I remember talking to Dr. Mercer about it later on. She said she

37

did not know how long they would be able to continue delivering

babies. Well, that worried me, so I called back the next week just

to verify that they would, indeed, be able to deliver my baby due

in September. I was stunned when I—when they told me no. I

could not believe that Dr. Mercer and her partners would not be

able to help me through my pregnancy.

In the middle of my pregnancy, I was going to have to switch to

a doctor I didn’t know. The race was on. It takes at least a month

to get in with an ob-gyn in Athens, because there are so few doctors. And I had to find a new doctor before all of those other pregnant women, 160 of them, found out the same news. I was lucky

enough to find another obstetrician to deliver my baby, but I had

influential friends who offered to help me get an appointment.

Do we need to network to get a doctor’s appointment now? When

I returned to Dr. Mercer’s office to pick up my records, I learned

that the wonderful staff, Lee Ann and Katie and Amy, who had

helped me through my first pregnancy, would be losing their jobs.

I realized that these women’s lives were going to be more rocked

than mine.

My new doctor recommended that I schedule a cesarean section

for my delivery. I don’t know if I needed one or if the doctor just

wanted to be sure he wouldn’t get sued. I don’t begrudge him that.

It certainly doesn’t help me, and the rest of the women in Athens,

if he gets sued and is forced to leave, too. Right now, one out of

every two deliveries in Athens are C-sections. The national average

is 26 percent, according to a Wall Street Journal article I read recently. In fact, no patient in Athens can have a V-back now.

Finally, a week before my scheduled surgery, during Hurricane

Francis, I had my beautiful, healthy baby girl, Claire Amelia.

When Dr. Mercer and her group were forced to drop obstetrics, the

women in Athens lost one-third of the obstetricians in town. The

remaining obstetricians are working very hard and still can not

meet the needs of our community. I don’t even know if any of them

will take high-risk patients these days. I know, too, that the doctors must test beyond the norm just to be safe.

But what does that do to our health care costs, my health care

costs? If there are no doctors, who will deliver our babies? Who will

deliver my children’s babies 20 years from now. We have the finest

health care system in the world, but we need your help to give doctors the freedom to take care of us. Women in my community are

wondering where they are going to go for health care.

Members of the committee, I ask for your help. I appreciate your

attention and your hard work to solve this complex problem.

Thank you.

[The prepared statement of Sherrie Campbell follows:]

PREPARED STATEMENT OF SHERRIE CAMPBELL

Thank you Chairman Deal, Ranking Member Brown and Members of the Committee for the opportunity to share my story.

My name is Sherrie Campbell, and I live in Watkinsville, Georgia, outside of Athens, Georgia. I am honored to be here today to speak with you about an issue that

has directly affected me and my family, the loss of my ob-gyn. Women and ob-gyns

have special relationships. He or she is the person in whom a woman entrusts so

many of her healthcare needs, and, in some cases, even her chances for survival.

It is a unique and often long-term relationship, one that can last through many

stages of a woman’s life, including the most joyous occasions.

38

On January 15, 2004, I was sitting in an examination room waiting on my obgyn, who has been my doctor for the last ten years. I was actually searching for

a good time to schedule a tubal ligation because I had turned forty a couple of weeks

earlier. However, I was in for a shock, as my ob-gyn, Dr. Cindy Mercer, breezed in,

saying, ‘‘Good news, your pregnancy test is positive.’’ Those seven words, especially

the last one, gave me the biggest surprise of my life.

After the initial shock, my husband and I settled in to the fact that we were going

to have our second child. As a result of my advanced maternal age, I was advised

to begin the process of having extra tests conducted to ensure everything was proceeding normally. During my first ultrasound, Dr. Mercer joined Amy, the

ultrasound tech, and me, to be sure everything looked okay. I was glad to see Lee

Ann and Angela, the OB nurses in the office again after they had taken such good

care of me during my first pregnancy. I trusted these women with my health and

my baby’s life. I initially resisted taking the blood test to check for Downs Syndrome, knowing that we wanted whatever baby we were given, but the spina bifida

test is done at the same time, and I wanted to give the baby a chance if there were

any problems. Given my age, I was also sent to the prenatal specialist in Athens.

The blood test showed I had a 1 in 35 chance of having a handicapped child, and

the worry was never far from the surface.

In the meantime, my husband’s and my own stress level was high. He had just

changed jobs and we were in the midst of changing insurers, and I had a sluggish

first trimester. Despite this, I was so looking forward to my next monthly OB visit

because it was with Dr. Mercer. I had read about the difficulty obstetric doctors

were having trying to find insurance, and in some cases paying six-figure insurance

premiums, and I remember talking to her about it. I asked her if they were feeling

the same kind of pressure. Dr. Mercer said that she did not know how long they

would be able to keep delivering babies as recently, one of the seven doctors that

delivers babies at the Athens Women’s Clinic, where Dr. Mercer works, had been

sued. As a result of that one suit, the Clinic had already been forced to stop its indigent care services because their insurance premiums had risen so drastically they

could no longer afford to provide free care.

I was very worried about Dr. Mercer and the other doctors, and so I called back

early the next week to verify that she would be able to deliver my baby, due in September. Sadly, I was told no. I was just stunned. I was halfway through a pregnancy

with my choice of doctors whom I trusted, revered even, and suddenly I was lost.

I could not believe that Dr. Mercer, with whom I had entrusted my healthcare with

for 10 years, would not be able to help me through my pregnancy. As I mentioned,

being advanced in age for this delivery made it even more important to me that I

have access to a physician that knew and understood my fears and concerns. Without Dr. Mercer I was unsure who would help me if the pregnancy turned difficult.

Now, the race was on. It takes at least one month to get in with a new OB/GYN

in the Athens area because there are so few doctors, and I knew I didn’t have a

prayer of getting in to see another doctor quickly. And, I had to find a new doctor

before all those other pregnant women found out the same news. A friend of mine

had told me about her good experience with the Women’s Center of Athens, and I

immediately called for an appointment. Apparently, I was one of the first to call because they took me. My friend who had recommended the Women’s Center is a

woman of influence at the University of Georgia. She told me she’d make a phone

call to get me in if they wouldn’t see me. I spoke with another friend, the wife of

an influential health care provider in Athens, who also told me that she’d make a

phone call to get me in to see someone else.

Is this good medicine? Does it now take networking to get in to see a doctor? And

what about the women who don’t have the same friends I do? What about the

women who are new to the area? Unfortunately, I wasn’t thinking about them at

the time. I did what it took to find the best care for my family. And that is what

we all want.

When I returned to Athens Women’s Clinic to pick up my records to take to the

Women’s Center of Athens, I spoke to Katie, the receptionist, who was about to lose

her job. And Amy, the ultrasound tech, who sat with me during the first tests, told

me that she was scared and worried about her family’s finances because she too was

about to be laid off. The Clinic’s OB nurse Lee Ann was laid off too, and she is now

working in a hospital. I began to realize that no matter how much I felt I’d been

abandoned, these women’s lives were rocked even harder than mine.

I wanted to help my friends but I also had to worry about my pregnancy. When

I finally met with my new doctor—it was recommended that I schedule a Caesariansection for my delivery. I couldn’t decide if I needed one, or if the doctor needed to

be sure he wouldn’t get sued. I don’t begrudge him that. It certainly doesn’t help

me and the rest of the women in Athens if he gets sued and is forced to leave

39

too.Thankfully, I was fortunate to find Dr. Halbach, a wonderful ob-gyn who could

help me deliver.

Just after midnight on September 7, a week before my scheduled surgery, and

during the hurricane, I left the bed to lie on our sofa and time what I thought were

Braxton-Hicks contractions. I found I was mistaken when my water broke around

2:30. I was relieved beyond measure that Dr. Halbach was on call that night, and

delivered our beautiful, healthy, baby girl, Claire Amelia.

As I spent my three days in the hospital recovering from surgery, I asked the

nurses and doctors plenty of questions. I was surprised at how many C-sections

were being performed; I later found out that one out of every two deliveries in Athens are C-sections. The national average is 26%, according to a Wall Street Journal

article I read recently.

My story doesn’t end here. I had my follow-up appointment with Dr. Halbach and

wished everyone there farewell because I wanted to continue to see the gynecologist

of my choice. A week later, I developed a breast infection, which is an unpleasant

experience for a nursing mother. Who was I supposed to call? I chose the obstetrician at the Women’s Center of Athens, the group that had helped me deliver Claire

Amelia in my time of need and they were gracious as always. About a month ago,

however, Claire stopped nursing abruptly and I experienced the familiar pain of another infection. The hormones that go along with nursing are strong and I tearfully

called the obstetrician’s office again. I was told the nurse would be on the phone

for a while and they didn’t have any appointments open. And then the receptionist

asked, ‘‘Are you still our patient?’’ For some reason, perhaps hormones, I was devastated by that question. No one wanted to take care of me. I made an appointment

for the next day, knowing that would be too late as my milk supply was dropping

rapidly. Eventually, I was able to get an appointment with a gynecologist back at

the Athens Women’s Clinic, my original doctor’s office. Although they could not deliver my baby, at least I still had the opportunity to see them for my other health

needs. Some women aren’t so lucky. Many ob-gyns have actually retired, or left one

state for another. I am thankful Dr. Mercer has decided not to leave Athens.

When Dr. Mercer and her group were forced to drop obstetrics, women in Athens

lost one-third of the ob-gyns in town. The remaining obstetricians in Athens are

working extremely hard and very long hours to take care of us. There aren’t that

many ob-gyns left. I don’t know how many will even take high-risk patients these

days. I’m glad that my advanced maternal age did not prevent me from getting the

care I needed. I know too that doctors are testing us beyond the norm, just to be

safe. Is that good medicine? Is every doctor doing it? How does that affect our health

insurance costs?

These doctors aren’t faceless, deep-pocketed, cosmic healers. In Athens, we have

a community. Our oncologists cry with us, our obstetricians cuddle our babies, our

pediatricians’ children go to Mother’s Morning Out with our children, they go to dinner with us, they are our clients, they worship with us, they are our friends. I know

that sometimes things can go wrong during delivery, and sometimes mistakes are

made. But we must weigh the effects of the current system on all women. If there

are no doctors, who will deliver our babies? What will happen when Claire and my

son, Thomas are ready to start their families? If they choose to stay in the Athens

area, who will deliver their babies twenty years from now? Will we depend solely

on emergency room doctors? We have a country where a woman can choose to have

a baby underwater if she wants. Why can’t I choose the doctor I want? Who is so

intent on making it impossible for them to practice?

We have the finest health care in the world, and our doctors cannot practice out

of fear. Members of the Committee, I came here to ask your help. We need some

help to give our doctors freedom to take care of us. Women in my community wonder where they are going to go for health care.

I don’t know the answers, but I’m here begging for your help because you have

the resources to see the big picture. I appreciate your attention and your hard work

to solve this difficult problem.

Mr. DEAL. Thank you, Ms. Campbell.

Mr. Malone, you are recognized for 5 minutes.

STATEMENT OF DYLAN MALONE

Mr. MALONE. Mr. Chairman, members of the subcommittee,

thank you for having me here to speak on behalf of my son, Ian,

who died before he ever said a word. He was the victim of medical

40

negligence during a botched delivery. He died last May. He didn’t

live to see his fifth birthday.

He is not alone. Medical malpractice is the leading cause of death

in America. According to the National Academy of Sciences Institute of Medicine study, about 98,000—the figure was mentioned

earlier, about 98,000 Americans die every year due to preventable

medical errors. That is more people than die from highway accidents, breast cancer, drunk driving, and AIDS. It is a serious problem. I agree with Dr. Bean, and I agree with Ms. Campbell: the

health care system is in trouble. But it is more than a fiscal crisis.

There is a patient safety crisis here, too.

Ian was a lot more than a statistic to my wife and I. He was our

son. And you never saw a more excited expectant father than I was

that summer of 1999 when they gave my wife a drug called Cytotec

to induce labor. We didn’t know that the manufacturer of Cytotec

had forbidden doctors to use it to induce labor. The physician

knew, but we didn’t.

In fact, Cytotec causes such violent contractions and such unnatural contractions, it is used as an abortion pill in some South

American countries and in Third World countries. Every bottle of

this drug has a pregnant woman on it with a ‘‘no’’ sign drawn

through her. So to hide that from us, the obstetrician dispensed the

pills in a simple brown envelope.

The Cytotec caused such unnaturally powerful contractions that

literally smothered Ian in the womb. His heartbeat began to falter.

It stopped completely about 20 minutes before he was born, he was

stillborn. He was more of a gray color than blue, and they had to

resuscitate him. Worse yet, then they falsified the chart to show a

good heartbeat throughout the entire delivery and to say that he

was breathing and that he had a heartbeat at delivery. They didn’t

make any mention of Cytotec, so the intensive care unit staff had

no idea what a severe injury they had just had transferred to their

facility. And that altered his course of treatment and made his outcome much, much worse.

His severe brain damage left him unable to swallow. He couldn’t

hold his head up. He could never speak. He had to be fed through

a tube in his intestines 20 out of every 24 hours of the day. He was

on dozens of medications. He had dozens of seizures a day. Eventually, because he couldn’t swallow or manage his airway, aspiration

pneumonia caught up with him, and he got a terrible fever and

died.

The insurance company, by the way, didn’t want to pay for this

care during this time. They coldly suggested that if were to surrender our custodial rights and put him up for adoption, the State

could provide for the nursing care he needed, which gets to the core

of the reason why I am here. You know, if you cap the amount of

money available to an injured person after a medical error, you are

not doing anything about the number of stories like this one. You

are only shifting the burden to the taxpayer. And I say, if you want

to lower the cost of medical malpractice, you need to lower the incidents of malpractice.

I didn’t know it then, but I now know that the obstetrician that

was responsible for my son’s death had lost eight malpractice suits

before I had ever laid eyes on the man. Even though the State

41

agreed with this, by the way, we filed a complaint against his license, and they felt that he was guilty of gross negligence and misconduct and that he had falsified his chart. And so they took action. They gave him a $1,000 fine. He still practices today. And

other children have died under his care in the meantime.

It is a handful of repeat offending physicians. I am sure Dr. Bean

is an excellent physician. Most doctors are. They are highly skilled,

caring people. But it is a handful of irresponsible physicians that

are doing the lion’s share of the damage, and that is the way—you

know, there are 100 ways you could tackle this problem. And I beg

you not to fixate on the one solution that punishes the victim and

makes the burden harder on my family.

You know, he was an infant. He didn’t have a job. His economic

loss was zero. So you are capping the funds available to help him.

I also suggest that you reform the insurance industry so that

they will stop price gouging hardworking physicians, like Dr. Bean.

No—if they are going to hold massive price hikes, they should hold

hearings to explain why they need them, like they do in California.

You can also reduce transactional costs in the courts by putting

reasonable limits on the number of expert witnesses. There are all

kinds of patient safety measures you could take that could fill

stacks of volumes. There are so many good ideas on the table.

So I urge you to think of the problem this way. I see my time

is about up. If 100,000 Americans die every year from preventable

medical errors, why don’t you cap that number instead of eroding

my son’s right to seek compensation so that we can take good care

of him and he could have a good quality of life during the 41⁄2 years

he did live?

[The prepared statement of Dylan Malone follows:]

PREPARED STATEMENT OF DYLAN MALONE

Mr. Chairman and Members of the Subcommittee: Good afternoon and thank you

for this opportunity to speak on behalf my son Ian, who died last May, never having

spoken a word. The victim of medical negligence during a botched delivery, he did

not live to see his fifth birthday.

Ian is not alone. Medical errors are one of the leading causes of death and injury

in our nation. As many as 98,000 Americans die every year as a result of preventable medical errors according to a National Academies of Sciences Institute of Medicine study.

More people die from medical negligence and mistakes each year than from highway accidents, drunk driving, breast cancer and AIDS.

According to a 1997 University of Chicago study the number of injuries caused

by medical accidents in inpatient hospital settings could be as high as three million

and cost as much as $200 billion.

But Ian was more than a statistic to my wife and I, he was our son. You never

saw a more excited father-to-be than I was in the summer of 1999 when Christine

was prescribed the drug Cytotec to induce labor, we didn’t know that the drug’s

manufacturer warned against the possibility of serious brain damage if used by

pregnant women, but our doctor did.

In fact, the drug is used in third world countries to induce abortions because it

causes violent contractions. Every bottle of Cytotec shows a pregnant woman with

a no sign drawn through her. To hide this from us the doctor gave us the pills in

a simple brown envelope.

The Cytotec caused such unnaturally powerful contractions that Ian was literally

smothered in the womb; they lost his heartbeat about 20 minutes before he was delivered. A stillborn, his little body color was more grey than blue, and he had to

be resuscitated.

Because Ian’s health care providers falsified his chart to show a steady heartbeat

throughout labor, made no mention of Cytotec, and listed him as breathing with a

42

heartbeat at delivery, the intensive care unit had no idea of the severity of his injuries. This cover-up attempt probably made Ian’s outcome even worse.

The resulting severe brain damage left Ian unable to swallow, so the secretions

had to be suctioned from his mouth by machine. He was fed by way of a tube into

his abdomen, and suffered from seizures and aspiration pneumonias. The insurance

companies didn’t want to pay for his care—they coldly suggested we put him up for

adoption.

Eventually we set out to tell Ian’s story to a jury. There was a settlement and

we were able to provide the hundreds of thousands of dollars of care Ian needed

every year.

I am committed to honoring his memory by fighting to improve the system for

those who will come after him. I strongly believe that there are many things we

can do to prevent many instances of negligence and medical errors.

I want people to know that medical negligence is a serious problem in this nation,

and that instead of fixing it, President Bush wants to pass a law that would target

all victims of medical negligence no matter how severe the injury or how horrible

the care.

This is a very important point. The backers of this radical proposal to change

medical malpractice in our country would hurt ALL victims—not just those who

have so-called frivolous cases. It really offends me when I hear that word. I want

the President to fix the health care mess and to stop blaming victims like my son

Ian. My son’s life was not frivolous.

Let’s start with medical negligence and medical errors. The President wants to cap medical malpractice awards at $250,000—I say if we’re going to have a cap—

let us cap the number of people who suffer from medical negligence every year. It’s

a national scandal that as many as 100,000 people die from medical errors annually.

We didn’t know it then, but the doctor who killed Ian had lost eight suits before

we ever saw him, and he is still practicing medicine today. In fact, other children

have been terribly injured or have died under his care since Ian’s birth, largely because the medical board refuses to act on his license, for Ian’s injury he paid only

a $1,000 fine. Of course, most doctors are highly skilled and care deeply about helping their patients. However, a small minority of doctors are causing the majority

of the damage, and we have to deal with this life and death issue.

We also need to make sure that insurance companies don’t gouge doctors for their

medical malpractice insurance premiums. Doctors should only have to pay rates

that are based on what the insurance companies have actually paid out in claims.

The bottom line is that I think it should be up to juries to decide whether a lawsuit shouldn’t be in court. I trust juries, not the insurance companies and HMOs.

We all should. It’s one of our most valued rights as Americans.

People need to know that this debate is really about protecting our constitutional

right to a trial by jury. And when they do, I don’t think the American people will

stand for this assault on one of our most fundamental freedoms.

Nearly 100,000 Americans die every year from preventable medical errors, that’s

the number we need to cap.

Thank you for allowing me to be here today.

Mr. DEAL. Thank you, Mr. Malone. We certainly all are sorry for

the loss of your son.

Ms. Rasar, you are recognized for 5 minutes.

STATEMENT OF MARY RASAR

Ms. RASAR. Thank you.

Chairman Deal, Ranking Member Brown, distinguished members

of the House Energy and Commerce Subcommittee on Health, it is

an honor for me to be here. Though given the experience of my

family—given the experience that my family and I had, if I could

take it back, I would rather not be here.

July 4, 2002, my dad was returning a rental car. His name is

James. Friends called him ‘‘Fisty.’’ He was struck by a young man

driving a big truck, and he was sideswiped. They wanted to take

him to—they needed to take him to a level one trauma center in

Las Vegas, which they had a level one trauma center in Las Vegas

until the day before my dad’s accident. It was closed because the

orthopedic surgeons who worked at the center lost their medical liVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 20143.TXT HCOM1 PsN: HCOM1
43

ability insurance coverage. A very large insurance company that insured over 40,000 physicians across the United States, had stopped

writing medical liability policies only for 1 month before.

Rather than sending my dad to the hospital that he needed to

get help, they had to—the paramedics had to take him to the nearest hospital to try to stabilize him so they could transport him

hours away to Salt Lake City’s level one trauma center. They

couldn’t stabilize him. He died. My dad died alone. My sister and

I didn’t have an opportunity to say goodbye to him. He was my

only living parent. My mom had died just a few years earlier to

cancer. And I hear all of these victims, and they are all sad. I

mean, we all have to experience loss, but my dad didn’t get treated

just because he couldn’t—the doctors couldn’t get insurance. And

they couldn’t get insurance, because the insurance company

wouldn’t cover the doctors anymore.

That doesn’t seem right. He wasn’t rich. He was a hardworking

man. He worked his whole life. He was in the military. He served

in the Air Force. He worked at the Golden Nugget. He had insurance. It is not like he didn’t have insurance, but he just couldn’t

get treated. So he just died. They just let him die. They did everything they could. One of the things that bothers me most is the

things that my dad has missed. He had a full life. We had—we experienced trauma in our family growing up, too. But some of the

things he has missed, he has missed his oldest son’s graduation

from high school. He has missed his oldest grandson’s graduation

from the Air Force basic training. He missed his grandson, Jeremy,

my nephew’s marriage. He missed the birth of his first greatgranddaughter. I miss him a lot, you know.

Mr. Chairman, the increase in medical malpractice insurance

premiums caused by frivolous lawsuits and out-of-control jury

awards has a consequence in the lives of real people. No one is denying the victims of malpractice their day in court, or even looking

to deny them unlimited economic damages for mistakes made by

doctors, but because of frivolous lawsuits and out-of-control jury

awards, my father, my children’s grandfather, did not stand a

chance. He was taken from us, and our family will be forever affected because of this crisis.

In the months that have passed, I have taken the opportunity to

learn about this growing crisis. Doctors are being forced from their

practices due to rising and outrageous medical liability insurance.

I have learned that the problem is not unique to Nevada. It is

growing, and it is finding victims like our family all across America. It is real for the expectant mothers in Maryland, West Virginia, Mississippi, and Pennsylvania who can’t find an ob-gyn. It is

real for parents of children in Florida who can’t find a pediatric

neurosurgeon. And it is very real for the elderly in Arizona who depend on their orthopedic surgeons and who are told that their

trusted doctors are moving to States where practicing medicine is

affordable and less risky.

The fact is, Mr. Chairman, my father did not have to die. After

speaking with numerous specialists, I am convinced that he would

be living today had the trauma center been open. So in our family,

as we consider this terrible tragedy of losing someone we love so

dearly, it is clearly understood that he did not die because of a car

44

accident but because of the crisis within our Nation’s health care

delivery system.

And as true as this is, there is an equal truth, Mr. Chairman:

you and your colleagues can fix this problem. You can do something

about it. To make sensible reforms denies no one of his or her

rights, but sensible reforms will save lives. Please, Mr. Chairman,

pass necessary medical liability reform. It really matters in life and

death.

Thank you.

[The prepared statement of Mary Rasar follows:]

PREPARED STATEMENT OF MARY RASAR

Chairman Deal, Ranking Member Brown, distinguished members of the House

Energy and Commerce Subcommittee on Health:

It’s an honor for me to be here, though given the experience my family and I have

had to endure I would certainly give up this honor—particularly if giving it up could

bring back my father . . . my children’s grandfather... Jim Lawson, a man known to

his friends as Fisty.

However, if by sharing my Dad’s story, I can save even one family from the tragedy we have had to needlessly endure, then I am not only honored to be here, Mr.

Chairman, but I am grateful for this opportunity.

On July 4, 2002, my father was returning a rental car to McCarran International

Airport in Las Vegas, Nevada, when he was his hit by a young man driving a large

truck. His injuries, though serious, were not immediately life-threatening, but he

had to be stabilized with the kind of equipment that is only found in a Level One

trauma center.

Fortunately, a Level One center with the exact equipment that was needed to

save his life was only five minutes away. Unfortunately, it was closed. Only days

before, the orthopedic surgeons who worked at that center had lost their medical

liability insurance coverage. A very large insurance company, that had covered over

40,000 physicians across the United States, had stopped writing medical liability

policies only the month before.

Rather than sending my father to the hospital with the best possible trauma care,

the paramedics did the best they could and rushed him to a community hospital,

where they attempted to stabilize him for air transport to the next closest Level One

center hours away in Salt Lake City, Utah. Unfortunately, the transfer was too late,

and without the proper equipment, my father died in the process.

Mr. Chairman, the continued increase in medical malpractice insurance premiums, caused by frivolous lawsuits and out-of-control jury awards has a consequence in the lives of real people. No one is denying the victims of malpractice

their day in court—or even looking to deny them unlimited economic damages for

mistakes made by doctors. But because of frivolous lawsuits and out-of-control jury

awards my father—my children’s grandfather—did not stand a chance. He was

taken from us. And our family will be forever affected because of this crisis.

In the months that have passed, I have taken the opportunity to learn more about

this growing crisis—doctors are being forced from their practices due to rising and

outrageous medical liability insurance. I have learned that the problem is not

unique to Nevada. It is growing and is finding victims like our family, all across

America. It is real for the expectant mothers in Maryland, West Virginia, Mississippi, and Pennsylvania who can’t find an ob/gyn. It is real for parents of children

in Florida who can’t find pediatric neurosurgeons. And, it is very real for the elderly

in Arizona who depend on their orthopedic surgeons and are told that those trusted

doctors are moving to states where practicing medicine is affordable and less risky.

The fact is, Mr. Chairman, my father did not have to die. After speaking with numerous specialists I am convinced that he would be living today had the trauma

center been open. So in our family, as we consider the terrible tragedy of losing

someone we loved so dearly, it is clearly understood that he died not because of a

car accident, but because of the crisis within our nation’s health care delivery system.

And as true as this is, there is an equal truth, Mr. Chairman: you and your colleagues can fix this problem. You can do something about it. To make sensible reforms denies no one of his or her rights. But sensible reforms will save lives. Please,

Mr. Chairman, please pass necessary medical liability reform. It really is a matter

of life and death. Thank you.

45

Mr. DEAL. Thank you, Ms. Rasar. We likewise extend our sympathy to you and your family for the loss of your father.

I am going to recognize myself now for the questioning period of

5 minutes. I would remind all of us that we have a second panel

of many members, and some of them have airplanes to catch this

afternoon, too, so I will not use my entire 5 minutes. I would encourage everybody to be as brief as possible in their questioning.

Dr. Bean, let me start with you.

We are in a quandary, obviously, as to what the relationship is

between capping non-economic losses and access to health care. Ms.

Rosenbaum, I believe who is going to testify in our second panel,

in her written testimony, indicates that she doesn’t think there is

necessarily that relationship between those caps and access that,

in fact, those caps might encourage bad medical practices. Would

you comment on that, please?

Mr. BEAN. I would like to answer the last question first. I can

think of no doctor that practices bad medicine simply because there

is or isn’t a cap. That doesn’t happen. And as far as it being a deterrent to bad practice, I don’t think that happens either. It is not

a quality issue. Neurosurgeons are sued about once every 2 years.

If being sued is a sign of quality or not, then we are all incompetent. We shouldn’t be practicing. It is not a sign of quality. It just

happens because of the high risk.

As far as the non-economic damage, we believe there are economic consequences. People need to be treated. They have to have

replacement of their income. They have to have living accommodations, and it may be for years. All of that should be provided. It

is the non-economic damage that is unquantifiable that can go

through the roof. That 60 percent or more, as I said, of what the

award is constituted of in these big cases, that is what we see as

driving the jury awards higher and higher. And like I said before,

it is a simple equation. What is paid out has to be paid in. And

it is the high-risk people like ob and what I do that this burden

falls on.

It is a matter of balance. Yes, I want to compensate everybody

who is medically injured. And yes, I know medical injuries would

happen—will happen, and I know I want to prevent them. They

will always happen, to some degree. But if we don’t strike a balance and decide that so much can be paid an no more, then we can

never stop this crisis from building and driving necessary doctors

out of practice. Congress has had to decide before what is the value

of suffering. It is hard to place a price on suffering, but you have

had to do it. You had a victims fund. You had to come up with a

price on the ultimate suffering. It was $250,000. At some point, our

resources run out, and we destroy the system that everybody depends on, and that is why we think that a cap on non-economic

damages is the balance that keeps the system operational.

Mr. DEAL. Thank you, Doctor.

I am going to forego the rest of my time.

Mr. Brown, you are recognized.

Mr. BROWN. Thank you, Mr. Chairman.

All of us on this panel, Republicans and Democrats, want to solve

this problem for doctors and for patients. We—but Dr. Bean, my

question is for you. We—first of all, we know several things. We

46

know the drug industry gave tens of millions of dollars to re-elect

the President. We know that HMOs gave millions of dollars to Republican leadership. We know this legislation, which is billed as a

malpractice—medical physician malpractice reform includes provisions to protect the drug industry to—from lawsuits, to absolve the

drug industry, HMOs, and the medical device industry from punitive damages. We know that the President and Republican legislative leaders are campaigning all over the country talking only

about the physicians and access to care but rarely mentioning the

protections for the drug industry, the insurance industry, and medical device industry.

And we also know this bill won’t pass when it looks like this, in

large part because it does absolve the drug industry, the insurance

industry, the medical device industry from responsibility for their

actions. We also know this bill could pass if we took those industries out and focused on malpractice reform and focused on really

helping this accessibility for patients to medical care.

So my question is, would you recommend to this panel, Dr. Bean,

that we remove the provisions protecting the drug industry, HMOs,

and medical device industry so we could focus on your profession

and access to care for everyone in this country?

Mr. BEAN. Mr. Brown, that is a difficult question, because I can’t

write the legislation or make the accommodations that have to be

made between the Republicans and the Democrats. I am focused on

physician liability. I know there are other—some other issues, particularly in—that relate to physicians, say, in using drugs. And

when we take new devices and use them with the best evidence

that they are safe, and when we give drugs, we use them with the

best evidence that they are safe, we do want to be protected until

we find new evidence that it isn’t. Now——

Mr. BROWN. But if I——

Mr. DEAL. [continuing] as far as the bill goes in that regard, I

think it should be part of the legislation. I can not tell——

Ms. DEGETTE. Will the gentleman yield?

Mr. BROWN. Well, go ahead. Yes, I will yield to my—I am sorry

to interrupt. We only have 5 minutes, and I——

Ms. DEGETTE. Dr. Bean, the question is, though, and I hope Mr.

Brown was going to ask this, I understand why you folks would

want to be immunized, but why should Congress also immunize the

pharmaceutical companies and the manufacturers of the medical

devices? That is not what you are talking about.

Mr. BEAN. No, I am truly talking about the dilemma of losing

physicians. And that was my focus in the——

Mr. BROWN. Okay. I think that that tells us—you know, I say to

you again that—and I have had this conversation with dozens of

doctors in my District and all over this—the Nation’s capitol and

all over Ohio that this proposal won’t—that frankly, for purposes

of fund raising, for purposes of political gain, the physicians are

being used by my friends on the other side of the aisle in order to

protect the drug industry, the insurance industry, and the medical

device industry to raise money both—and political support both

from you and your organizations and millions of dollars from the

drug industry, and we are never going to solve this problem.

47

We are going to see a panel like this 2 years from now with the

human tragedies that Ms. Rasar and Mr. Malone and Mr. Huggins

have had, human tragedies that none of us can understand unless

it has happened to us. We are going to have those again in 2 years,

because this Congress is dysfunctional because of its addiction to

drug industry, insurance industry, and medical device industry

money. And until the doctors understand that you—that we care

about what happens to you but we don’t want to protect Merck

when they don’t come forward and tell the truth about Vioxx, or

we don’t want to protect these other drug industries—other drug

companies and other insurance HMOs and other medical device industries when this—that is what will happen if we continue down

this road.

I would—I have 40 seconds left. Mr. Huggins, you wanted to say

a couple more things before your 5—when your 5 minutes were up.

Would you like to take a minute, my last minute or——

Mr. HUGGINS. Yes, the one thing——

Mr. BROWN. If that would help you. Okay.

Mr. HUGGINS. Okay. Sorry. One thing I wanted to mention is I—

Dr. Bean here, I feel for him. And I feel for Ms. Campbell here. My

personal—my best friend and workout partner is one of the top

pulmonologists in the State of Tennessee, and he was there at my

side at the hospital. He got there when my wife came in. And we

have talked on this issue. I know how high his premiums are. I

know what he has to pay. We have talked about it a lot. And my

heart goes out to him, because he has to pay a lot.

Now he feels as I do, that it needs to start with the insurance

industry and regulation of bad doctors practicing medicine, because

it is only a handful. And if we start it there, the one thing that

really troubles me, being a lifelong Republican, is the fact that the

platform that I have believed in for so many years is—has to do

with limiting government in our lives and giving rights to the

State. And what you guys are proposing is the absolute 180 degrees. It is getting government—telling myself, as an individual,

what I can recover from loss and what my loss is and tell me what

it is.

Mr. DEAL. Mr. Huggins, I am going to have to cut you off.

Mr. HUGGINS. Thank you.

Mr. DEAL. You have been about a minute past Mr. Brown’s time,

and I sensed a hardening of his heart, and I just didn’t want it to

go any further.

Mr. HUGGINS. Yes, sir.

Mr. DEAL. I am going to recognize Dr. Burgess next.

Mr. BURGESS. Thank you, Mr. Chairman.

I will just have to say I find some of the remarks coming from

the other side unfortunate. I thought this was a panel convened to

access information from this—from the witnesses and not to hold

forth on political agendas.

Dr. Bean, I agree with you, and I agree with you wholeheartedly

that the question does become about what will the system—what

can the system bear and how do you compensate people for their

loss. And to that end, I would like to ask Mr. Malone, and again,

just everyone else up here on the panel, I feel for you, for your loss

48

of your son Ian, can you tell us, sir, did you pursue litigation

against your physician?

Mr. MALONE. Yes, we did. We—the suit is still pending against

the obstetrician. Although Ian was born in the summer of 1999, we

did settle with the new birth center that he was delivered at for

the amount they had insurance for, which is a $2 million settlement. Of course Ian’s medical bills were several hundred thousand

dollars a year, and he lived for 41⁄2 years, so after you pay court

costs and expert witnesses and you do that math, you can see that

that money was needed, which is why we are still pursuing the obstetrician.

I should also mention that when I was last in Washington, DC,

my son was still alive, and I was lobbying for patient safety

changes. And during the interim, Ian has died. And since the last

time I have pled with the Congress for new patient safety changes

to go after repeat offending doctors, that obstetrician mutilated a

child in a very bizarre forceps delivery and killed him, killed a little boy last Christmas.

So I—this is not—I apologize for the melodrama, but this is not

tax code. People are dying, and I urge you to act.

Mr. BURGESS. A couple of other questions, then, along that line

just for my clarification. Do you mind me asking what State you

come from?

Mr. MALONE. Washington State.

Mr. BURGESS. Okay. And your son was born at a birthing center?

Mr. MALONE. Right, a new one, a new facility built just about

one mile from the major facility where—that we traditionally use.

With my wife’s—Ian was not our first child. With my wife’s prior

delivery, she had refused anesthetic, so—to try it natural. She was

in the hospital setting, but she—so she thought she would take it

to the next step. If she wasn’t going to avail herself for the anesthesiologist, why not be in the nice, clean, beautiful birth center

that is right next to the hospital.

Mr. BURGESS. Just for my own satisfaction, do they do cesarean

sections at the birthing center?

Mr. MALONE. No, they—that is why they are so close. They

transfer, if they need a C-section, to the hospital. They have an arrangement set up for that. We asked a lot of questions along those

lines before we chose them.

Mr. BURGESS. You know, Cytotec—of course, I was a practicing

obstetrician before I came to Congress, and off label use of Cytotec

is not that uncommon. I will just tell the other members of the

panel that.

Mr. MALONE. Right.

Mr. BURGESS. I would say what is uncommon would be to use a

potent medication like that in a birthing center. That is clearly a—

in Texas, at least, a departure for the standard of care. Back in the

1980’s, when there was some trouble with credentialling, this Congress, and I obviously wasn’t here then, passed laws that required

physicians to register, and I have registered with the National

Practitioner Data bank. And unfortunately, that information is not

generally available to the general public. In Texas where we passed

some significant liability reforms, which included caps, and I eluded to some of the benefits from that, and I hope we get to hear

49

from my good friend, Mr. Montemayor, here in a little bit, about

the—what has happened down in Texas, and I hope you will stay

around for that. But one of the other things that we did was all

of the information collected on a physician from the Texas State

Board of Medical Examiners is now instantly available on the

Internet. Every month, it goes up. And I know this because I was

a little bit late in paying my licensure fee because I am up here

in Congress and I don’t have a secretary to do it for me anymore,

and sure enough, my name was up there as delinquent for non-payment of fees, and they didn’t give me much of a grace period. But

it just underscores the point that this information does need to be

available to consumers. And as a doctor, I have no problem with

that. I think what we have done in Texas, perhaps, could be a

model for other areas. Of course, bearing in mind what Dr. Bean

has said, we are all sued. You can be the best doctor in the world,

and you are still going to accumulate lawsuits. In fact, if you are

a good doctor, people are going to seek you out when they have

more than just the average amount of difficulty, and as a consequence, bad results can follow, and as a consequence, lawsuits

can follow.

I would just also, with my last 5 seconds, I do hope this panel

will refrain from the use of the word ‘‘frivolous’’ when it talks about

lawsuits. I support the President in this endeavor, but I don’t like

the use of that language. As we have seen here today, there is always a human tragedy at the base of every story, and that is a

word we should avoid.

Mr. DEAL. I thank the gentleman.

Ms. DeGette.

Ms. DEGETTE. Thank you, Mr. Chairman.

And I would like to add my thanks to all of the witnesses, particularly those of you who have lost family members. It can’t be

easy coming here. And you all give us a good dimension.

Dr. Bean, I wanted to talk with you, because I want you, and

your members, to understand, also, the members on both sides of

the aisle understand there is an issue with malpractice, with doctors having increasing malpractice insurance rates. We want to get

to the bottom of that and try to deal with it. But I did want to ask

you a few questions.

You are here representing the Alliance of Specialty Medicine, is

that correct, Doctor?

Mr. BEAN. That is correct.

Ms. DEGETTE. And I believe you said in your opening and then,

again, in response to the chairman’s question that the obvious

problem here is the payouts are quite a bit more than the insurance premiums, which is why premiums have to go up. Is that correct?

Mr. BEAN. That is the understanding.

Ms. DEGETTE. Yes.

Mr. BEAN. The information we have is $1.65 going out in 2002

for $1 coming in.

Ms. DEGETTE. Uh-huh. Well, if staff could put up this chart,

please. It should be up on the screen. There we go.

[Chart.]

50

This is according to an independent agency, which shows that actual payouts by malpractice insurance companies are $55.43 per

every $100 of premiums written. Do you see that?

Mr. BEAN. That is right.

Ms. DEGETTE. And so what this incurred is the $80.48, that is

what the malpractice insurance companies said that they would

have to pay out, but in fact, they only paid out $55.43. Is that—

do you see that there, too?

Mr. BEAN. I see that.

Ms. DEGETTE. And Doctor, this is the kind of chart that people

like me look at and we say, ‘‘Well, maybe part of the problem is

the way malpractice insurance companies are writing their insurance policies.’’ Would you have any disagreement with that?

Mr. BEAN. Not on the face of it, no.

Ms. DEGETTE. Okay. If you could move the microphone a little

closer.

Mr. BEAN. Certainly.

Ms. DEGETTE. Thanks.

Mr. BEAN. No, not on the face of it, but I—if there is more comment, but what I can say is this. Surely it is an arcane, actuarial

system in figuring out the rates in insurance, and I certainly don’t

understand. I have to look at simple figures like you do. But what

I do understand is this. Insurers have dropped out of virtually

every State. If it was such a lucrative business, they would stay

and make money, but they are leaving. We have trouble

finding——

Ms. DEGETTE. Well, let me ask you this, Doctor, because as a

representative of your group, I assume you wouldn’t have any objection, as part of legislation, to doing some kind of a study about

how malpractice insurance companies write their insurance policies, would you?

Mr. BEAN. Certainly not.

Ms. DEGETTE. Absolutely——

Mr. BEAN. I would have no——

Ms. DEGETTE. [continuing] because your real problem, I think as

you testified more than once, is that doctors are having to leave the

practice of medicine, emergency trauma centers are having to close

down because they—doctors just can’t afford to pay these premiums, isn’t that right?

Mr. BEAN. That is true.

Ms. DEGETTE. Would you be surprised to know that when we

considered this legislation in the Energy and Commerce Committee

last year, the sponsor of the bill told me that the groups said that

they would not allow such a study to be conducted as part of the

legislation?

Mr. BEAN. I am—can’t say I would be surprised. I wasn’t aware

of that.

Ms. DEGETTE. But your group wouldn’t object to that?

Mr. BEAN. No, as a matter of fact, we would like to look at other

additional elements as well, like expert witness standards.

Ms. DEGETTE. Absolutely. And——

Mr. BEAN. There is more to this.

Ms. DEGETTE. Right.

51

Mr. BEAN. When you talk about the MICRA elements, most of

those are to stop the hemorrhage or loss at the end of the line. We

would like to stop it at the beginning. There is more to it.

Ms. DEGETTE. Now when you refer to ‘‘MICRA,’’ Doctor, what

you are talking about is the tort reform legislation that was passed

in California, correct?

Mr. BEAN. Correct.

Ms. DEGETTE. But the bill that was passed by the House last

year is different in a number of respects from MICRA, isn’t that

correct?

Mr. BEAN. There are other elements. That is correct.

Ms. DEGETTE. And the other thing we learned in our hearings

last year, in the 108th Congress, was, in fact, after Congress

passed this tort reform bill, it had caps on non-economic damages

and everything else. Malpractice premiums still didn’t go down for

the doctors in California until after a voter initiative capping malpractice insurance premiums was passed. Isn’t that correct?

Mr. BEAN. I don’t think that is—I have heard that, and I have—

and what happened is MICRA was passed in 1975.

Ms. DEGETTE. These have to pass through court challenge, which

takes a while before the insurance premiums actually come down.

That initiative, Prop 103, was passed in 1988. By 1985, I think the

effect of the cap in California was visible. Around the country, between 1985 and 1987, there was a big spike. That was the second

crisis after 1975 to 1986.

Ms. DEGETTE. Well, in fact——

Mr. BEAN. I don’t think that——

Mr. DEAL. I am going to have to call time.

Mr. SHIMKUS. Mr. Chair, a parliamentary inquiry.

Mr. DEAL. Who is——

Mr. SHIMKUS. Mr. Chairman.

Mr. DEAL. Yes.

Mr. SHIMKUS. Is it not proper that if we are using a graph and

a chart from some consumer that we know who they are and that

we have a copy of that?

Ms. DEGETTE. You bet you. Mr. Chairman——

Mr. SHIMKUS. Would you provide that to us?

Ms. DEGETTE. [continuing] this is from the Best State Line Report. It is an independent group. I would be happy——

Mr. SHIMKUS. I would like——

Ms. DEGETTE. Mr. Chairman, would—excuse me, Mr. Shimkus,

I would be—I would ask unanimous consent to place it in the

record of the hearing.

Mr. SHIMKUS. And if we would have copies of it——

Mr. DEAL. Without objection——

Mr. SHIMKUS. [continuing] for the presentation, that would be

appreciative.

Mr. DEAL. Would you distribute it to members, also?

Ms. DEGETTE. Yes. Counsel has it, Mr. Chairman.

Mr. DEAL. All right. Let me ask the members, if they would, if

at all possible, let us try to keep the questioning to an absolute

minimum. We have several witnesses on the next panel that are

going to have to leave, and we are not going to be able to hear from

them at all if we don’t get to them rather quickly.

52

Let us see. Who is next? Dr. Norwood is next.

Mr. NORWOOD. Mr. Chairman, I will pass on questioning to get

to the next panel, if you please.

Mr. DEAL. Thank you.

Ms. Capps.

Ms. CAPPS. Dr. Bean, I wanted to follow up on an answer that

you gave to Chairman Deal’s question. You pay—you pointed out

that Congress set an amount for 9/11 victims.

Mr. BEAN. Yes, ma’am.

Ms. CAPPS. And some payments were as high as $6.3 million.

The average payment was for a death in that tragic event was

about $2 million, I believe. And I wondered if you would be willing,

speaking for your organization, to consider raising the caps to that

level for victims of medical malpractice. A yes or no answer.

Mr. BEAN. Yes, the answer is no, and the reason is that we have

evidence across the States that the effect on premiums is in direct

relation to the cap on non-economic damages. Anything that high

would have virtually have no effect——

Ms. CAPPS. Who—so do you——

Mr. BEAN. [continuing] in——

Ms. CAPPS. Excuse me. But do you believe, then, that what Congress did was wrong?

Mr. BEAN. No, I don’t believe what Congress did in that situation

was wrong. In terms—and the illustration was that there is a need,

at times, to decide on the value of suffering. And in this case, we

are trying to strike a balance between what money is in the medical system and what can be paid out for injuries.

Ms. CAPPS. Okay. I want to ask you one more question, but with

a yes or no, because I have—I want to be able to elicit more information from a couple of our witnesses.

Tell me if your organization would support efforts to aggressively

regulate insurance providers along side of implementing caps to

make sure doctors absolutely reap the savings the caps theoretically create.

Mr. BEAN. I have no expertise. The answer is yes if—just as in

State regulation, if there is a regulation to be done that would improve the consistency of premiums, certainly.

Ms. CAPPS. Thank you.

Both Mr. Huggins and Mr. Malone, your stories are compelling,

and thank you, Ms. Campbell, for being a witness here today as

well.

Mr. Huggins, it is clear that Vioxx, and to generalize on that

drug company, is a great concern to you. And the fact that we are

now exempting them or—in this legislation, I wonder if you would

comment for a minute or so on that a bit more.

Mr. HUGGINS. Well, primarily—excuse me. Primarily, I don’t—

personally, I don’t understand why pharmaceutical companies have

been included into this bill.

Ms. CAPPS. It concerns some of us, too.

Mr. HUGGINS. I am looking at Merck and many other companies

that are all traded on the market. And what you are proposing is

the fact that I do not have a right to sue a pharmaceutical company for what I feel I should be compensated for, for whatever reaVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6602 20143.TXT HCOM1 PsN: HCOM1
53

son, from a fault of a drug company when they are traded on the

market every day.

Ms. CAPPS. Um-hum.

Mr. HUGGINS. And to me, that—it—to me, it raised the line of

my constitutionality, my constitutional right to be able to say what

I feel my loss is when I am—you know, I am holding accountable

a drug company. And you know, it is traded on the market every

day. I don’t—I personally don’t understand what this has to do

with this bill.

Ms. CAPPS. I certainly appreciate your statement.

Mr. Malone, I am a nurse, and you are concerned about patient

safety and really focusing on that just makes my heart glad. And

I wonder if you, in the short time that I have remaining, would say

another word about how you feel, you have been through the mill

on this, ways that we, in Congress, could focus in that—in ways

that we should in this topic.

Mr. MALONE. Well, indeed, some of it is a State issue, and some

of it can be done here at the Federal level. Obviously, cooperation

between States, you hear horror stories about physicians who go

from State to State. Dr. Anderson, our physician, even went from

country to country to avoid detection as a—such as scoundrel went

across the Canadian border several times. But some things that

can be done are changing the makeup of medical review boards,

more transparency in settlements. Secrecy agreements are very

hard on patient safety. You know, there are a variety of things, and

I am out of time.

Ms. CAPPS. I would——

Mr. DEAL. Thank you.

Ms. CAPPS. I hope we can continue to use your expertise. Thank

you.

Mr. DEAL. Ms. Bono.

Ms. BONO. Mr. Chairman, I think I am going to yield at this

point and wait for the second panel.

Mr. DEAL. Thank you.

Ms. Myrick.

Ms. MYRICK. No, Mr. Chairman. I will yield at this time, also.

Mr. DEAL. I believe that covers everybody then.

Thank you all for doing so. Thanks to all of you on the panel for

being here. We appreciate your testimony and you being present

for this hearing. If we can now go to the second panel, ladies and

gentlemen, if you will take your seats.

Thank you, ladies and gentlemen. We are pleased to have such

a distinguished panel, and we will try to move as quickly as possible, because I do understand the travel plans are here.

And first is Mr. Montemayor, is that correct, who is the insurance commissioner from the Texas Department of Insurance. And

I believe I will just introduce each of you as we go along.

Mr. Montemayor.

54

STATEMENTS OF JOSE MONTEMAYOR, CPA INSURANCE COMMISSIONER, TEXAS DEPARTMENT OF INSURANCE; J. ROBERT HUNTER, DIRECTOR OF INSURANCE, CONSUMER FEDERATION OF AMERICA; JAMES HURLEY, AMERICAN ACADEMY OF ACTUARIES; SARA ROSENBAUM, HIRSH PROFESSOR

AND CHAIR, DEPARTMENT OF HEALTH POLICY, THE

GEORGE WASHINGTON UNIVERSITY MEDICAL CENTER,

SCHOOL OF PUBLIC HEALTH AND HEALTH SERVICES; SHERMAN ‘‘TIGER’’ JOYCE, AMERICAN TORT REFORM ASSOCIATION; GURKIRPAL SINGH, ADJUNCT PROFESSOR OF MEDICINE, DEPARTMENT OF GASTROENTEROLOGY, STANFORD

BUSINESS SQUARE; JOSEPH P. GLENMULLEN, PSYCHIATRIST, HARVARD LAW SCHOOL, MENTAL HEALTH LAW

SCHOOL HEALTH SERVICES; RICHARD F. KINGHAM, COVINGTON & BURLING; SIDNEY M. WOLFE, DIRECTOR, HEALTH

RESEARCH GROUP, PUBLIC CITIZEN; AND VICTOR E.

SCHWARTZ, SHOOK, HARDY & BACON, L.L.P.

Mr. MONTEMAYOR. Thank you, Mr. Chairman. It is a pleasure to

be here. And members, it is a real honor to be here and give you

our perspective on this particular line of insurance from a regulatory standpoint and also from how we see the market in some of

the issues that are underpinning the medical malpractice issues.

As many of you may not know, the insurance commissioners are

on a State by State basis. In Texas, the insurance commissioner is

elected by the Governor and with the advice and consent of the

Senate and basically is in charge of regulating the insurance markets within the State.

Part of the regulatory duties are, obviously, then to license insurance companies, monitor their solvency levels, approve their rates

or monitor their rates, in the Texas cases monitor their rates, and

also approve the insurance contracts themselves, the forms.

There is also the National Association of Insurance Commissioners. And the role of the National Association is an organization

of insurance regulators from all 50 States, the District of Columbia,

and the U.S. territories, and it dates back to the 1800’s. It provides

a forum for the development of uniform policy on insurance matters where appropriate. And obviously, they are very, very focused

on solvency and financial aspects of this.

In terms of my own activities at the NAIC, I Chair the National

Property and Casualty Insurance Committee and the Subcommittee for Market Conditions Working Group, which was established in 2003 to look at, particularly, distressed lines within property and casualty. The very first one that came up for study, and

the one with most urgency, was this one, medical malpractice. And

we heard a lot of testimony on the causes and solutions for what

came to be known as the medical liability insurance crisis.

We assigned some researchers and eventually produced a pretty

good-sized report, which I will forward to your committee clerk so

you can have use of it. But we basically looked at a number of the

States, all 50 States’ premiums and what was happening in the—

within the market. The overarching conclusion was that underwriting losses, as Dr. Bean, I think, on the previous panel pointed

out, it is what comes in and what goes out, were the major single

contributing factor influencing the rate increases being experienced

55

by physicians and other health providers over the past several

years.

The report provided data, research sources, and a list of the market interventions available for consideration to State regulators as

well as to policymakers, such as the U.S. Congress or the State legislators.

The Texas experience, basically, manifested itself in its fullness

on this last set of crises, probably around 1999 to 2000. Nursing

home licensed insurers participating totally in our market dropped

from eight to just one. Licensed insurers for physicians medical

malpractice, I used to have about 17 in the market. We dropped

to four. Many of them actually went completely insolvent, broke,

and had to be put into receivership, because losses greatly exceeded

their premiums. In fact, there were about 6,500 doctors displaced

where they lost their insurance coverage completely either because

the insurance company went out of business or stopped writing the

line because their own regulator basically said, ‘‘No more. That is

all there is you can handle.’’

Over 11 medical malpractice insurance with more than 6,500

physicians withdrew effectively from the market. There were several rate increases from 1999 to 2002. Those increases range from

23 percent to about 117 percent. The Joint Underwriting Insurance

Association, which is one of the tools effectively used in some of the

markets, grew to something like 3,000 physicians, and we physically got involved in trying to place many of these dislocated physicians. The largest medical malpractice writer, the Texas Medical

Liability Trust, not an insurance company, but a creature of the

legislature, that acts effectively as an insurance company, increased its rates over 140 percent over that 4-year period and had

to, in addition to that, assess an extra $5,000 per physician just to

maintain an ability to continue to write. And we had had a cap effectively on non-economic damages since, let us see, 1977, and it

was due to inflation. Because of a series of interventions in court,

it basically was applicable only in cases of wrongful death, and that

had climbed to about $1.7 million.

The way that Texas legislature responded, they adopted a law to

effectively place limits on non-economic damage, made provisions

for periodic payments for future damages as they became accrued.

It is stipulated that pre-judgment interest was not awardable on

future damages. And in terms of the class actions, it required that

Texas courts keep plaintiff attorney fees in proportion to the actual

work done. They took the unusual step to also put in front of the

voters a constitutional amendment to immediately get at the benefits to be had from these tort reforms. And so the law went into

effect, basically, with those reforms on the 1st of September. The

voters were voting to ratify a constitutional amendment specifically

empowering the State legislature to adopt those limitations 10 or

12 days later, and they became effective.

Our experience since——

[The prepared statement of Jose Montemayor follows:]

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Mr. DEAL. I am sorry. I am going to have to cut you off. You have

run past our time limit, but we will try to get back and let you expound on some of that.

I would remind everybody that we do have your written testimony that is available and in the record for the members here.

Let me move to Mr. Hunter, Mr. Robert Hunter, Director of Insurance for Consumer Federation of America. We are pleased to

have you.

STATEMENT OF J. ROBERT HUNTER

Mr. HUNTER. Thank you, Mr. Chairman.

I am going to be referring to some exhibits—oh, by the way, Mr.

Chairman, congratulations on your first hearing.

I handed up some charts, because they are in the—my written

statement, but maybe they are easier to follow. There are four I am

going to touch on.

[Chart.]

The first chart is the insurance economic cycle. It tells you when

and why various hard and soft markets happen. The first was in

the mid-1970’s. I was the Federal Insurance Administrator under

President Ford when the first medical malpractice hard market hit.

The White House Domestic Policy staff asked me to look into what

was going on and whether or not there was an explosion in medical

malpractice claims and verdicts. I dutifully sought the data, wanting to keep my job, and the first thing I discovered was that the

medical malpractice statistics were not broken out in the insurance

annual reports sent to the insurance department, so we asked the

commissioners to do so, which they have done. And that is why we

have data today.

We undertook a closed claim study with the States and in due

course, I reported back to the White House that there was no explosion in claims, and the cause of the spike was the economics of

the insurance industry. Thus, we now know the hard market and

the rate shocks that physicians have experienced in the last few

years, more than 10 percent between 2000 and 2003, relate to

these same economic conditions. The recent rate spike was the very

bad news that brings us here today.

The good news is that the cycle has now turned soft. Recent data

shows that medical malpractice insurance premium increases have

essentially ended. In 2004, A.M. Best reports, malpractice insurance premiums rose by just 4 percent nationwide. The rates are expected to be level for the next few years, as has occurred in each

previous soft market phase.

Look at the chart of Federal funds rates. That is the second

chart.

[Chart.]

Medical malpractice insurance companies have a huge float on

the premiums, since it takes several years for claims to be paid on

average from the time they get the premium. Medical malpractice

insurers invest heavily in bonds so when interest rates fall, rates

must rise. And we have been at historic low rates, which is part

of the cause of the rate increases we have witnesses.

85

Using the data from the medical malpractice insurance company

reports, I did the next chart, which is on page six of my written

statement.

[Chart.]

The top line of the chart shows premiums collected by insurance

companies for medical malpractice on a nationwide, per doctor average, adjusted for medical inflation. Premiums, you will see, go up

and down with the cycle, but losses—the bottom, losses paid per

doctor are flat. They are not going up. It is—there is no explosion

in losses. It is—they are flat. This is the same thing we reported

to the White House in 1976 the same thing we reported to the

White House in 1986, the same thing that is going on today. Inflation-adjusted payouts producted dropped from 2001 to 2003. The

average payment per closed claim over the last decade was under

$30,000 from which attorneys were compensated. Few of them, one

in four persons, who file a medical malpractice claim, collect any

money at all.

The low cost of the medical malpractice system is further evidenced by the final chart at the bottom of page six of my testimony.

[Chart.]

Here, we see the ratio of medical malpractice insurance premiums to the total health care costs. Medical malpractice insurance

costs as a proportion of national health care spending is minuscule,

60 cents per $100 spent. If you cap non-economic damages, you will

not impact the cost of health care in any meaningful way. Even if

you eliminated the entire malpractice system, you would hardly impact the cost of health care.

The good news is this: the worst of the malpractice rate hikes are

over. Congress has time to conduct a thorough examination of the

problem and proposed thoughtful solutions. You should not rush

into changes in the medical liability system harming victims and

fail to address insurance failures, which are at the root of these

problems.

You should consider and act on insurance reform measures to

control the harmful excesses of a business cycle that causes sudden

and unjustifiable price spikes and coverage cutbacks every decade

or so. I recommend you look at the Proposition 103 system of California or look at Texas. They did pass tort reform, but it wasn’t

until Jose went after them and disapproved some rate filings that

they actually got rates to go down.

You should also assess and enact methods to reduce negligence

and medical errors by physicians and medical facilities. And you

should evaluate why so few people who are hurt by medical negligence receive any form of compensation. I think you should review a no-fault system, or other methods that maybe could work

here. But you shouldn’t just do something to victims without looking at other mechanisms. You have plenty of time, now that this

cycle has turned, to make sure the action you take does no harm.

Given the return to the soft insurance market, I strongly urge

you to use this gift of time to make sure that your action is best

for all Americans, and particularly that victims of malpractice

would not be harmed by your actions.

[The prepared statement of J. Robert Hunter follows:]

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PREPARED STATEMENT OF J. ROBERT HUNTER, DIRECTOR OF INSURANCE, CONSUMER

FEDERATION OF AMERICA

Good morning. I am J. Robert Hunter, insurance director for the Consumer Federation of America. I am also an actuary, a former federal Insurance Administrator

under Presidents Ford and Carter, and a former Texas Insurance Commissioner.

CFA is a non-profit association of 300 organizations founded in 1968 to advance the

consumer interest through research, advocacy and education.

I would like to thank Chairman Nathan Deal, Ranking Member Sherrod Brown

and the other members of the Subcommittee for the opportunity to offer our comments on this extremely important issue. For the third time in less than thirty

years, Congress and state legislators across the country have been grappling with

the problem of fast-rising medical malpractice rates. Insurers insist that a sharp increase in large, unwarranted jury verdicts is to blame for the crisis. As a result, lawmakers on this Subcommittee and in a variety of states are considering legislation

to place further limits on the legal rights of Americans who have been harmed or

killed by medical malpractice.

However, my research over many years shows that insurers are pointing fingers

when they should be looking in the mirror. I first studied this issue at the behest

of President Ford when, in the mid-1970s, a hard market hit medical malpractice

in much the same fashion as we are witnessing today. After doing research similar

to what I will present to you today, the Ford White House decided not to push for

tort reform since, as today, the sudden surge in prices for doctors was not due to

a jump in claims, but was related to insurance industry economics.

It is the ‘‘hard’’ insurance market and the insurance industry’s own business practices that are largely to blame for the rate shock that physicians have experienced

in the last few years. Recent data also shows that sharp rate increases have ended

(in 2004, medical malpractice premiums rose by just four percent) and are expected

to level out for the next few years. CFA has also found that:

• The rate problem was caused by the classic turn in the economic cycle of the industry, sped up—but not caused by—terrorist attacks.

• Further limiting patients’ rights to sue for medical injuries would have virtually

no impact on lowering overall health care costs. Medical malpractice insurance

costs as a proportion of national health care spending are miniscule, amounting

to 60 cents per $100 spent.

• Insurer losses for medical malpractice have risen slowly in the last decade, by less

than the rate of inflation.

• Malpractice claims have not ‘‘exploded’’ in the last decade. In fact, rather than exploding, inflation-adjusted payouts per doctor dropped from 2001 to 2003. The

average payment per closed claim over the last decade was $27,524, from which

both the plaintiff and defense attorneys were compensated.

THE GOOD NEWS—STEEP MEDICAL MALPRACTICE RATE HIKES ARE OVER

The insurance industry is a very cyclical business. Insurers make most of their

profits from investment income. During years of high interest rates and/or excellent

insurer profits, insurance companies engage in fierce competition for premium dollars to invest for maximum return. Insurers severely under price their policies and

insure very poor risks just to get premium dollars to invest. This is known as the

‘‘soft’’ insurance market.

But when investment income decreases—because interest rates drop or the stock

market plummets or the cumulative price cuts make profits become unbearably

low—the industry responds by sharply increasing premiums and reducing coverage,

creating a ‘‘hard’’ insurance market that usually degenerates into a ‘‘liability insurance crisis.’’

A hard insurance market happened in the mid-1970s, precipitating rate hikes and

coverage cutbacks, particularly with medical malpractice insurance and product liability insurance. A more severe crisis took place in the mid-1980s, when most lines

of liability insurance were affected. Again, beginning in late 2000, the country started experiencing a ‘‘hard market,’’ this time affecting property as well as liability coverage, with some lines of insurance seeing rate increases of 100 percent or more.

The following exhibit shows the national cycle at work, with premiums stabilizing

for 15 years following the mid-1980s crisis. (The 1992 data point was not a classic

cycle bottom, but reflected the impact of Hurricane Andrew and other catastrophes

in that year.)

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1 Review and Preview, A.M. Best and Co., January 2005, Page 19.

Prior to late 2000, the industry had been in a soft market since the mid-1980s.

The strong financial markets of the 1990s had expanded the usual six- to ten-year

economic cycle. No matter how much they cut their rates, insurers wound up with

a great profit year when investing the ‘‘float’’ on premiums in an amazing stock and

bond market. (The ‘‘float’’ occurs during the time between when insurers receive premium payments and pay out insurance losses. There is about a 15-month lag in

auto insurance and a five to ten year lag in medical malpractice.) Further, interest

rates were relatively high through the 1990s as the Federal Reserve Board focused

on recovery from the recession rather than inflation.

But in 2000, the market started to turn with a vengeance as the Federal Reserve

cut interest rates again and again. For medical malpractice insurers, mainly investing in bonds, this sharply reduced future expectations for investment returns and

was reflected in their ratemaking by raising rates.

This cut in interest rates began to take place before September 11th, as the chart

above shows. The terrorist attacks sped up the price increases that were coming,

collapsing two years of anticipated increases into a few months. The increases we

witnessed were mostly due to the cycle turn, not the terrorist attack or any other

single factor. This was a classic economic cycle bottom.

Fortunately, the hard market is over. Medical malpractice written premiums rose

by only 4 percent in 2004 1, following three years of double digit increases. We anticipate at least eight years of small medical malpractice price increases until the

next economic cycle turns hard.

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2Sources: A.M. Best and Co. special data compilation for AIR, reporting data for as many

years as separately available (premiums and losses); American Medical Assoc. (number of nonfederal doctors, 1975, 1980, 1985, 1986, 1990, 1992-2002; other years estimated); Bureau of

Labor Statistics (CPI).4 See Exhibit 3 for underlying data.

MEDICAL MALPRACTICE WRITTEN PREMIUMS AND PAID LOSSES

I have tested two hypotheses advanced by the insurance industry to justify sharp

premium increases in recent years. First, if large jury verdicts in medical malpractice cases or any other tort system costs are having a significant impact on the

overall costs for insurers and are therefore the reason behind skyrocketing insurance rates, then losses per doctor should be rising faster than medical inflation over

time. Second, if lawsuits or other tort costs are the cause of rate increases for doctors—rather than decreasing interest rates and other economic factors—those losses

should be reflected in rate increases in line with such losses, not in ups and downs

that instead reflect the state of the economy, the well-documented insurance economic cycle, interest rates, the stock market or the profitability of insurers’ investment income.

The data show that both hypotheses are completely false, as demonstrated in the

charts below. First, these charts show that since 1975, medical malpractice paid

claims per doctor have tracked medical inflation very closely (slightly higher than

inflation from 1975 to 1985, and flat since). In other words, payouts have risen almost precisely in sync with medical inflation. Moreover, contrary to what the insurance and medical lobbies have alleged, the years from 2001 through 2003 saw no

‘‘explosion’’ in medical malpractice insurer payouts or costs to justify sudden rate

hikes. In fact, rather than exploding, inflation-adjusted payouts per doctor dropped

from 2001 to 2003. These data confirm that neither jury verdicts nor any other factor affecting total claims paid by insurance companies that write medical malpractice insurance have had much impact on the system’s overall costs over time.

While payouts closely track medical inflation, medical malpractice premiums diverge significantly. They do not track costs or payouts in any direct way. Since 1975,

the data show that in constant dollars, per doctor written premiums—the amount

of premiums that doctors have paid to insurers—have fluctuated almost precisely

with the insurers’ economic cycle, which is driven by such factors as investment income, poor insurer business decisions and changing interest rates, not by lawsuits,

jury awards, the tort system or other causes. Moreover, medical malpractice insurance premiums rose much faster in 2002 and 2003 than was justified by insurance

payouts. This hike is similar to the rate hikes of the past, which occurred in the

mid-1980s and mid-1970s and were not connected to actual payouts.

In sum, the results of my analysis are startling; premiums rise and fall with the

insurance industry’s economic cycle, but paid losses do not 2:

‘‘Direct Premiums Written’’ is the amount of money that insurers collected in premiums from doctors during that year. ‘‘Direct Losses Paid’’ is what insurers actually

paid out that year to people who were injured—all claims, jury awards and settlements—plus what insurance companies pay their own lawyers to fight claims.

We calculate the paid losses on a per doctor basis to remove from the trend we

are studying the effect of the ever increasing number of doctors in America. We acVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00092 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
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3 A.M. Best and Co., special report, run for the Americans for Insurance Reform.

4Statistical Abstract of the United States, 2005 Edition, U.S. Census Bureau, 2003 is the Bureau’s projection.

knowledge that the number of doctors includes a certain number of doctors that are

retired or otherwise not in the medical malpractice system, but since we are interested in overall loss trends over time, and since the percentage of doctors in that

category should not vary much year to year, this fact should not significantly impact

our results. ‘‘Paid losses’’ are a far more accurate reflection of actual insurer payouts

than what insurance companies call ‘‘incurred losses.’’ Incurred losses are not actual

payouts. They include payouts but also reserves for possible future claims—e.g., insurers’ estimates of claims that they do not even know about yet. While incurred

losses do exhibit more of a cyclical pattern, observers know that this is because in

hard markets, as we are currently experiencing, insurers will increase reserves as

a way to justify price increases. In fact, the current insurance ‘‘crisis’’ rests significantly on a jump in loss reserves in 2001. Historically, reserves have been later ‘‘released’’ to profits during the ‘‘softer’’ market years. For example, according to a June

24, 2002, Wall Street Journal front page investigative article, St. Paul, which until

2001 had 20 percent of the national med mal market, pulled out of the market after

mismanaging its reserves. The company set aside too much money in reserves to

cover malpractice claims in the1980s, so it ‘‘released’’ $1.1 billion in reserves, which

flowed through its income statements and appeared as profits. Seeing these profits,

many new, smaller carriers came into the market. Everyone started slashing prices

to attract customers. From 1995 to 2000, rates fell so low that they became inadequate to cover malpractice claims. Many companies collapsed as a result. St. Paul

eventually pulled out, creating huge supply and demand problems for doctors in

many states. Christopher Oster and Rachel Zimmerman, ‘‘Insurers’’ Missteps

Helped Provoke Malpractice ‘‘Crisis,’’ Wall Street Journal, June 24, 2002.

The calculations underlying this chart are attached as Appendix A.

MEDICAL MALPRACTICE HAS LIMITED IMPACT ON HEALTH CARE COST

In last decade, paid malpractice claims totaled $37.8 billion; 1.3 million claims

were closed. Thus the average payment per closed claim was $27,524, from which

both the plaintiff and defense attorneys were compensated.

Of the 1.3 million claims, only 352,000 received any payment. This means that

only 23 percent of claimants got any money. If you were one of the ‘‘lucky’’ ones

whose injury was severe enough and the negligence clear enough to qualify you for

a payment, your payment averaged $107,000, from which your lawyers were paid.

On average, about 35,000 claims per year are paid out in any way.

The relatively low overall cost of this system is shown in the following chart:

Currently, the total premiums paid by doctors and hospitals total $10.1 billion 3,

compared to the Health Expenditures of $1,674 billion, 4 which means that medical

malpractice premiums represent six-tenths of one percent of Health Expenditures

in the nation. Note that the line of best fit shows that this tiny percentage is declining over time.

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5See ‘‘Why Not the Best,’’ a report on how Proposition 103 works at www.consumerfed.org.

6To Err is Human, Building a Safer Health System, Institute of Medicine, National Academy

of Sciences; November, 1999.

So, even if Congress took a step we would never advise and completely immunized

doctors and hospitals from legal liability in the event of medical negligence, total

health care costs in this country would hardly be affected.

WHAT SHOULD CONGRESS DO?

First, Congress should do no harm. The national problem of serious rate hikes is

over for the time being, except perhaps in a couple of states. This gives Congress

time to carefully study the situation and not rush to take action that would harm

victims of medical negligence.

Unfortunately, medical malpractice legislation passed in 2003 by the House of

Representatives, H.R. 5, would do harm to consumers of healthcare and to victims

of medical malpractice. The cumulative effect of capping non-economic and punitive

damages, shielding liability for some drug manufacturers, and changing joint and

several liability and collateral source rules would be to remove key deterrents to

dangerous medical practices. Moreover, H.R. 5 does absolutely nothing to deter physician negligence.

Part of a Congressional evaluation of medical malpractice should look at the question of why so few people hurt by medical negligence are recovering compensation

for that negligence. Perhaps a review of no-fault and other mechanisms for compensating victims of medical negligence might be considered. How much would alternative systems cost? How can the system be made more efficient while fully protecting the many victims of malpractice in the nation?

Another aspect of this study should be insurance reform, which is a way for the

regulators to control the harmful excesses of a business cycle that causes sudden

and unjustifiable price spikes and coverage cutbacks every decade or so. We recommend looking at the system passed in California, the Proposition 103 system,

which has worked wonders to hold down rates in that state.5 For example, this system has allowed consumer representatives to successfully intervene in opposition to

recently proposed rate hikes by some malpractice insurers, which has led to much

lower rates for doctors. Congress should consider creating a national reinsurance facility, which would serve to stabilize the wild swings in rates that characterize the

current insurance cycle. A national reinsurance facility would also make insurance

more readily available by spreading the cost of large medical injuries to a national

base, which does not presently occur.

Congress should also evaluate methods for reducing negligence and medical errors

by physicians and medical facilities. It is well known that a very small proportion

of doctors cause a very high percentage of the claims for medical malpractice. Yet

many states have weak procedures for disciplining dangerous doctors and stopping

them from continuing to practice, putting American consumers of health care at

risk.

The 1999 report regarding medical errors by the Institute on Medicine (IOM)

demonstrates that far too many Americans face the serious possibility of an injury,

or even death, due to medical mistakes in the hospital. Using the IOM’s low estimate of 44,000 deaths per year, medical errors are the eighth leading cause of death

in this country, ahead of breast cancer and AIDS. The IOM’s high-range estimate

of 98,000 deaths a year would make medical errors the fifth leading cause of death,

more than all accidental deaths.6 Of course, some medical errors are directly attributable to physician negligence and some are not, but the IOM report clearly demonstrates the serious implications of rolling back the legal rights of Americans who

have been harmed or killed by malpractice. If Congress gets it wrong, the pain and

suffering incurred by many families across the country will only increase.

Before this Committee rushes through tort reform legislation, I urge you to get

the facts. As the evidence I’ve presented you with today shows: (a) insurers have

themselves to blame for the predicament they—and physicians and patients

throughout the country—face, and (b) you have plenty of time to make sure that

any action you take does no harm, given the return of the soft insurance market

and very small price increases for doctors.

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APPENDIX A

Year

Written

Premiums

(thousands)

Paid Losses

(thousands)

Loss

Ratio

Number of

Doctors

(Non-federal)

Medical

Care

Inflation

(CPI-U)

Direct

Premiums

Written

per Doctor

Direct Losses

Paid per

Doctor

Direct Premiums Written per Doctor-2003

Dollars

Direct Losses

Paid per

Doctor-2003

Dollars

1975 $865,208 $190,867 0.221 366,425 47.5 $2,361.21 $520.89 $14,793.63 $3,263.51

1976 $1,187,978 $188,545 0.159 381,000 52 $3,118.05 $494.87 $17,844.85 $2,832.17

1977 $1,423,091 $248,969 0.175 395,575 57 $3,597.53 $629.39 $18,782.87 $3,286.05

1978 $1,412,555 $294,456 0.208 410,151 61.8 $3,443.99 $717.92 $16,584.64 $3,457.17

1979 $1,405,991 $391,800 0.279 424,726 67.5 $3,310.35 $922.48 $14,594.96 $4,067.10

1980 $1,493,543 $521,849 0.349 439,301 74.9 $3,399.82 $1,187.91 $13,508.49 $4,719.91

1981 $1,616,470 $665,570 0.412 455,904 82.9 $3,545.64 $1,459.89 $12,728.37 $5,240.81

1982 $1,815,056 $847,543 0.467 472,507 92.5 $3,841.33 $1,793.72 $12,358.71 $5,770.92

1983 $2,033,911 $1,079,862 0.531 489,109 100.6 $4,158.40 $2,207.81 $12,301.59 $6,531.27

1984 $2,282,590 $1,197,979 0.525 505,712 106.8 $4,513.62 $2,368.90 $12,577.27 $6,600.97

1985 $3,407,177 $1,556,300 0.457 522,315 113.5 $6,523.22 $2,979.62 $17,104.06 $7,812.64

1986 $4,335,863 $1,709,883 0.394 547,222 122 $7,923.41 $3,124.66 $19,327.92 $7,622.12

1987 $4,781,084 $1,905,491 0.399 556,647 130.1 $8,589.08 $3,423.16 $19,647.27 $7,830.38

1988 $5,166,811 $2,128,281 0.412 566,072 138.6 $9,127.48 $3,759.74 $19,598.40 $8,072.85

1989 $5,500,540 $2,273,628 0.413 575,496 149.3 $9,557.91 $3,950.73 $19,051.81 $7,874.99

1990 $5,273,360 $2,415,117 0.458 584,921 162.8 $9,015.51 $4,128.96 $16,480.44 $7,547.78

1991 $5,043,773 $2,423,418 0.480 609,384 177 $8,276.84 $3,976.83 $13,916.31 $6,686.47

1992 $5,228,362 $2,808,838 0.537 633,846 190.1 $8,248.63 $4,431.42 $12,913.17 $6,937.35

1993 $5,469,575 $3,028,086 0.554 648,662 201.4 $8,432.09 $4,668.20 $12,459.73 $6,898.00

1994 $5,948,361 $3,174,987 0.534 661,960 211 $8,985.98 $4,796.34 $12,674.07 $6,764.89

1995 $6,107,568 $3,326,846 0.545 689,121 220.5 $8,862.84 $4,827.67 $11,961.82 $6,515.71

1996 $6,002,233 $3,556,151 0.592 717,335 228.2 $8,367.41 $4,957.45 $10,912.09 $6,465.10

1997 $5,864,218 $3,587,566 0.612 737,263 234.6 $7,954.04 $4,866.06 $10,090.03 $6,172.80

1998 $6,040,051 $3,957,619 0.655 757,865 242.1 $7,969.82 $5,222.06 $9,796.86 $6,419.19

1999 $6,053,323 $4,446,975 0.735 778,491 250.6 $7,775.71 $5,712.30 $9,234.05 $6,783.64

2000 $6,303,206 $4,988,474 0.791 793,211 260.8 $7,946.44 $6,288.96 $9,067.72 $7,176.36

2001 $7,288,933 $5,424,197 0.744 814,776 272.8 $8,945.93 $6,657.29 $9,759.20 $7,262.49

2002 $8,928,252 $5,806,463 0.650 831,645 285.6 $10,735.65 $6,981.90 $11,186.73 $7,275.26

2003 $10,142,575 $5,622,377 0.554 848,514 297.1 $11,953.34 $6,626.15 $11,973.46 $6,637.30

Sources: A.M. Best and Co. special data compilation for AIR, reporting data for as many years as separately available (premiums and losses); American Medical Assoc. (number of non-federal doctors, 1975, 1980, 1985, 1986, 1990, 1992-2002; other years estimated); Bureau

of Labor Statistics (CPI).

Mr. DEAL. Thank you, sir.

Our next witness is Mr. James Hurley representing the American Academy of Actuaries. And Mr. Hurley, being from Atlanta, I

especially welcome you here today. You are recognized for 5 minutes.

STATEMENT OF JAMES HURLEY

Mr. HURLEY. Thank you, sir.

Good afternoon, Chairman Deal, Ranking Member Brown, and

members of the subcommittee. Thank you for inviting me to testify

today on behalf of the American Academy of Actuaries.

The Academy is the public policy and professionalism organization for actuaries practicing in all specialties within the United

States. It is nonpartisan and it assists the public policy process

through the presentation of clear and objective actuary analysis. It

also develops and upholds actual standards of conduct, qualification, and practice.

I will start by discussing a recent experience in the medical malpractice line of business.

During the 1990’s, the medical malpractice line experienced favorable operating results contributed to by favorable reserve development on prior coverage years and healthy investment returns.

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Insurers competed aggressively, health care providers shared in the

benefit of improved loss experienced and higher levels of investment income through stable or decreasing charged premiums.

Recently, however, the cost of medical malpractice insurance has

been rising. Rate increases have been precipitated in part by the

growing size of claims, more frequent claims in some areas, and

higher defense costs. The decline in bond yields has exacerbated

the need for rate increases. From a financial standpoint, medical

malpractice results deteriorated for several years through 2001 and

have improved only slightly since then. 2004 data is not yet available but is projected to reflect similar results.

Two indicators of financial results are the combined ratio and the

operating ratio. We can obtain these indicators for reporting companies from A.M. Best, a company that offers comprehensive data

to insurance professionals and tracks these results. The combined

ratio is an indication of how the company is doing in its insurance

underwriting. For all companies reporting to A.M. Best, the combined ratio deteriorated to 155 percent for 2001, improving only to

138 percent through 2003. For underwriting, this represents a loss

of 55 cents on each dollar of premium written in 2001. Preliminary

projections for 2004 are for a combined ratio of 133 percent.

A measure of the overall profitability of a line of business is the

operating ratio. The A.M. Best operating ratio adjusts the combined ratio for other expense and income items, primarily investment income. The operating ratio deteriorated to 134 percent in

2001, indicating a loss of 34 cents on every dollar of premium, and

stands at 121 percent in 2003. Given lower interest income levels,

the 2004 operating ratio will probably not improve as much as the

projected improvement in the combined ratio. At these levels, 2001

through 2003 results are the worst they have been in 15 years or

more, exceeding levels of the 1980’s.

As is clear from this data, the loss in operating environment has

deteriorated. Benefits of favorable reserve development appear to

be gone, and the available investment income offset has declined.

In fact, some observe that reserve liabilities may require increases

to cover current ultimate loss obligations. As a result, rates for

both insurers and re-insurers have increased to properly align with

current loss and investment income levels. Companies failing to do

this jeopardize their surplus base and financial health.

My written statement summarizes the two key drivers of financial results and their effects on operating results and surplus for

some 30 companies that specialize in this coverage. These companies represent one-third of the experience, approximately one-third

of the experience, reported to A.M. Best. The results for these companies are more favorable than the industry in general, but reflect

similar deterioration.

In chart B, page seven of my testimony, the total after-tax operating income for these companies is shown. The favorable operating

income of the earlier years, 1995—the mid-1990’s, is in the 20 percent neighborhood. It declines to a slight profit in 2000, but to a

loss of 8 percent in 2001, further to 11-percent loss in 2002, before

improving to a 2-percent loss in 2003. Companies who continue to

write medical malpractice must interpret the current experience

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and determine what rates to charge for perspective coverage in

light of this experience.

It should be mentioned that self-insured programs, that is trusts

and captives, have also been effected by deteriorating loss and investment circumstances. These entities, insuring their own liability

exposure, have experienced increased funding levels and lower

yields on assets held to cover these liabilities. The impact extends

beyond an insurance company problem.

Tort reform, as discussed, is one means to address the current

challenges. The Academy, which takes no position for or against

tort reform, has previously reviewed and commented on this subject. The observations include, one, that a package of tort reforms

is more likely than individual reforms to impact on losses in premium. The key among reforms is a per medical injury, non-economic cap at a relatively low level and collateral source rule, including introduction as evidence at trial.

You should keep in mind that poorly crafted reforms can increase

losses, and therefore rates, rather than decrease them. But we

should also have reasonable expectations about what will happen.

One is reforms may not yield immediate rate reductions, particularly given the rate increases being implemented, since the actual

affect, including judicial confirmation, will not be immediately

known. A non-economic cap will not affect the economic component

of claim costs, and thus the severity will still likely call for increases in rates but perhaps at some lower level.

Last, such reforms should make the loss environment more predictable, encourage market participation, and reduce concerns

about large, subjective, non-economic damage components to

claims.

Mr. DEAL. Mr. Hurley, I am going to have to ask you—if you

have a sentence or two to summarize, that would be good.

Mr. HURLEY. Just to say that the Academy appreciates the opportunity to be here, and we would be happy to provide any input

we can, subsequent to the testimony here.

[The prepared statement of James Hurley follows:]

PREPARED STATEMENT OF JAMES HURLEY, MEDICAL MALPRACTICE SUBCOMMITTEE,

AMERICAN ACADEMY OF ACTUARIES

INTRODUCTION

The American Academy of Actuaries appreciates the opportunity to provide comments on issues related to medical malpractice. The Academy hopes these comments

will be helpful as Congress considers related proposals.

This testimony discusses what has happened to medical malpractice financial results and its likely effect on rates, tort reform, and some discussion of frequent misconceptions.

MEDICAL MALPRACTICE—WHAT HAS HAPPENED?

The medical malpractice insurance marketplace continues to be in serious turmoil. After an extended period of reported high profitability and competitiveness

during the 1990s, this turmoil began with serious deterioration in financial results,

continued with some consequences of these results and, still at this point, gives rise

to an uncertain future. Industry-wide financial results reflect a 2003 combined ratio

(the measure of how much of a premium dollar is dedicated to paying insurance

costs of the company in a calendar year) of 138 percent, an improvement relative

to the 2001 and 2002 results, but still well above profitable levels. The 2003 operating ratio (reducing the combined ratio for investment income) of about 116 percent

extends the several year pattern of losing money after the inclusion of investment

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income. Projections for 2004 are for a slightly lower combined ratio (approximately

133 percent) and probable lesser improvement in the operating ratio. This follows

2001 and 2002 operating ratios exceeding 120 percent.

The consequences of these poor financial results are several. Insurers have voluntarily withdrawn from medical malpractice insurance (e.g., St. Paul, writer of approximately nine percent of total medical malpractice insurance premium in 2000)

or have selectively withdrawn from certain marketplaces or segments of medical

malpractice insurance. In addition, several insurers have entirely withdrawn due to

poor financial results (e.g., Phico, MIIX, Frontier, Reciprocal of America, some of

which are under regulatory supervision). Overall, premium capacity has been reduced by more than 15 percent. These withdrawals fall unevenly across the states

and generally affect those identified as jurisdictions with more severe problems than

others.

Capacity to write business would have decreased even more if not for the fact that

much medical malpractice coverage is written by companies specializing in this coverage, some that were formed for this specific purpose.

These figures focus on the published insurance industry statistics. Parallel to industry experience is the growing volume of self-insured programs (e.g., deductible

programs, trusts and captives), which have significantly increased their share of the

medical liability exposure ‘‘pie’’ over time; some would estimate this segment has

responsibility for half or more of the exposure today. These self-insured entities,

such as hospitals, see the dollars needed to cover their retentions increasing and

are having increased difficulty securing excess or reinsurance coverage to manage

their exposure.

The future outlook is not positive, at least in the short term. Claim costs are increasing more rapidly now than they were historically. Further, full adjustment to

the lower interest rate and tightened capacity environment would drive higher premium rates, even if losses were not increasing. The combined effect is that there

are likely to be more poor financial results and additional rate increases.

Background-Market Conditions in the 1990s

The current premium increases are hard to understand without considering the

experiences of the last decade. Rates during this time period often stayed the same

or decreased relative to the beginning of the period due to several of the following

factors:

• Favorable Reserve Development—Ultimate losses for coverage years in the late

1980s and early 1990s have developed more favorably than originally projected.

Evidence of this emerged gradually over a period of years as claims settled.

When loss reserves for prior years were reduced, income was contributed to the

current calendar years, improving financial results (i.e., the combined and operating ratios). That was the pattern during the middle to late 1990s for 29 provider-owned/operated medical malpractice insurers whose results are shown in

Chart A. What is evident from that chart is that favorable reserve development

(shown as a percentage of premium) was no longer occurring after 2001, as developments in 2002 and 2003 were unfavorable. This unfavorable development

contributes to bottom line losses for these companies.

• Low Level of Loss Trend—The annual change in the cost of claims (frequency and

severity) through most of the 1990s was lower than expected by insurers, varying from state to state and by provider type. This coincided with historically low

medical inflation and may have benefited from the effect of tort reforms of the

1980s. Rates were established using the earlier anticipated higher loss trends

and were able to cover these actual lower loss trends for a time. As a result,

rate increases were uncommon and there were reductions in several states. This

was justified in part because the rates established at the beginning of the last

decade proved too high, inasmuch as carriers had assumed higher loss trends.

Insurers responded to the emerging favorable loss trend in different ways.

Some held rates stable and paid policyholder dividends or gave premium discounts. Some reduced filed rates. Others increased rates modestly and tried to

refine pricing models to improve overall program equity. In general, however,

premium adequacy declined in this period. Collected rates came into line with

insurers’ costs, but competitive actions pushed rates even lower, particularly in

some jurisdictions.

• High Investment Yields—During the 1990s, investment returns produced a real

spread between fixed income rates of return and economic inflation. Medical

malpractice investment results are based on a portfolio that is dominated by

bonds with stock investments representing a minority of the portfolio. Although

medical malpractice insurers had only a modest holding of stocks, capital gains

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on stocks also helped improve overall financial results. These gains improved

both the investment income ratio and the operating ratio. • Reinsurers Helped—Many medical malpractice insurers are not large enough to

take on the risks inherent in this line of insurance on their own. The additional

capacity provided by reinsurers allows for greater availability of medical malpractice. Similar to what was happening in the primary market, reinsurers reduced rates and covered more exposure, making the net results even better. • Insurers Expanded Into New Markets—Given the financial results of the earlyto-mid-1990s, some insurers expanded into new markets (often with limited information to develop rates). They also became more competitive in existing markets, offering more generous premium discounts. Both actions tended to push

rates down.

What Has Changed?

Although these factors contributed to the profitability of medical malpractice insurance in the 1990s, they also paved the way for the changes that began at the

end of the decade.

• Loss Trend Began to Worsen—Loss cost trends, particularly claim severity, started to increase toward the latter part of the 1990s. The number of large claims

increased, but even losses adjusted to eliminate the distortions of very large

claims began to deteriorate. This contributed to indicated rate increases in

many states. • Loss Reserves are Strengthened—As the losses began to deteriorate, many insurers responded by strengthening their reserves. However, as of year-end 2003,

the adequacy of the aggregate loss reserve levels for the industry is still being

questioned despite the reserve strengthening recorded during the 2000-2003 period. The statistics for the earlier mentioned 29 companies have been better

than the total industry, to date. Some observers suggest that aggregate reserves

will require further increases, particularly if severity trends continue or intensify. • Investment Results Have Declined—Bond yields have declined from 1990’s highs.

The lower bond yields reduce the amount of expected investment earnings on

a future policy that can be used to reduce prospective rates. A one percent drop

in interest rates can be translated to a premium rate increase of two to four

percent (assuming no changes in other rate components) due to the several year

delay in paying losses on average. A 2.5 percent drop in interest rates, which

has occurred since 2000, can translate into rate increases of between 5 percent

and 10 percent. Note low investment yields may cause an insurer to reduce its

market presence and also may discourage new entrants. The recent increases

in yields may alleviate some of the pressure from this source. • The Reinsurance Market Has Hardened—Reinsurers’ experience deteriorated as

their results were affected by increased claim severity and pricing changes earlier in the decade. Because reinsurers generally cover the higher layers of

losses, their results are disproportionately influenced by increases in claim severity. This, coupled with the broadly tightened reinsurance market after

Sept.—11 2001, has caused reinsurers to raise rates substantially and tighten

reinsurance terms for medical malpractice.

The bottom line is that these changes have required insurers to increase rates if

they are to preserve their financial health and honor future claim payments.

The Results

To obtain a better understanding of the effect of these changing conditions, we

focus on the results of 29 specialty insurers that are primarily physician owned or

operated and that write primarily medical malpractice business. Their results reflect the dynamics of the medical malpractice line. This sample represents about

one-third of the insured exposures reported by the insurance industry in the United

States.

These insurers, achieving more favorable financial results than that of the total

industry, showed a slight operating profit (six percent of premiums) in 2000. This

deteriorated to operating losses for years 2001 through 2003 (see Chart B), with

2002 reflecting an 11 percent loss, improving to a 2 percent loss in 2003.

There are two key drivers of these financial results:

• Insurance Underwriting—For these companies, a simplified combined ratio was

calculated by dividing calendar year loss and loss adjustment and underwriting

expenses by premium. On this basis, the combined ratios peaked at 134 percent

in 2001, improving to 129 and 122 percent for 2002 and 2003, respectively. That

means in 2003, these insurers incurred $1.22 in losses and expenses for each

$1.00 of premium. The five years preceding 2000 were fairly stable, from 110

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percent to 115 percent. Deterioration of the loss and loss adjustment expense

ratio drove these results; the underwriting expense ratio remained relatively

constant (see Chart C).

• Investment Income—Pre-tax investment income (including realized capital gains

and losses) emanates from policyholder-supplied funds invested until losses are

paid as well as from the company capital (‘‘surplus’’). The investment income

offset to the underwriting loss is measured as a percentage of earned premiums.

This statistic declined during the measurement period from the mid-40 percent

level of the mid-1990s to the 20 percent level in 2002 and 2003 (see Chart D).

This offset will continue to decline because (i) most insurer-invested assets

are bonds, some of which were purchased before recent lower yields, and interest earnings do not yet fully reflect these lower yields; and (ii) the premium

base is growing due to increased rates and growth in exposure. Invested assets

are not increasing as rapidly as premium and, therefore, investment income as

a percentage of premium will decline.

The effect of these results on surplus is reflected in Chart E, which shows the

percent change in surplus from one year to the next. Surplus defines an insurer’s

capacity to write business prospectively and to absorb potential adverse loss development on business written in prior years (see Chart E). After three years of declines, the increase in 2003 is in part from external sources (e.g., surplus notes, capital contributions and trust preferreds).

Tort Reform

Some states enacted tort reform legislation after previous crises and in response

to the current circumstances as a compromise between affordable health care and

an individual’s right to seek recompense. The best known is the Medical Injury

Compensation Reform Act or MICRA, California’s tort reform package. Since

MICRA’s implementation in 1975, California has experienced a more stable marketplace and lower premium increases than have most other states.

Tort reform has been proposed as a solution to higher loss costs and surging rates.

Many are suggesting reforms modeled after California’s MICRA, although some

have cautioned against modifying the MICRA package. The Academy, which takes

no position for or against tort reforms, has previously reviewed and commented on

this subject. Based on research underlying the issue, we observe the following:

• A coordinated package of tort reforms is more likely than individual reforms to

achieve savings in malpractice losses and insurance premiums.

• Key among the reforms in the package is a cap on non-economic awards (on a

per-event basis and at some level low enough to have an effect, such as

MICRA’s $250,000) and a mandatory collateral source offset rule.

• Such reforms may not assure immediate rate reductions, particularly given the

size of some increases currently being implemented. The actual effect, including

whether or not the reforms are confirmed by the courts, will not be immediately

known.

• These reforms are unlikely to eliminate claim severity (or frequency) changes but

they may mitigate them. The economic portion of claims is not affected if a noneconomic cap is enacted. Thus rate increases still will be needed.

• These reforms should reduce insurer concerns regarding dollar awards containing

large, subjective non-economic damage components and make the loss environment more predictable.

• Poorly crafted tort reforms could actually increase losses and, therefore, rates.

FREQUENT MISCONCEPTIONS

In closing, it might be helpful to address some frequent misconceptions about the

insurance industry and medical malpractice insurance coverage.

Misconception 1: ‘‘Insurers are increasing rates because of investment losses, particularly their losses in the stock market.’’

As we have pointed out, investment income plays an important role in the overall

financial results of insurers, particularly for insurers of medical professional liability, because of the long delay between payment of premium and payment of losses.

The vast majority of invested assets are fixed-income instruments. Generally, these

are purchased in maturities that are reasonably consistent with the anticipated future payment of claims. Losses from this portion of the invested asset base have

been minimal, although the rate of return available has declined.

Stocks are a much smaller portion of the portfolio for this group, representing

about 15 percent of invested assets. After favorable performance up through the latter 1990s, there has been a decline in the last few years, contributing to less favorable investment results and overall operating results. Investment returns are still

97

positive, but the rates of return have been adversely affected by stock declines and

more so by lower fixed income investment yields.

In establishing rates, insurers do not recoup investment losses. Rather, the general practice is to choose an expected prospective investment yield and calculate a

discount factor based on historical payout patterns. In many cases, the insurer expects to have an underwriting loss that will be offset by investment income. Since

interest yields drive this process, when interest yields decrease, rates must increase.

Misconception 2: ‘‘Companies operated irresponsibly and caused the current problems.’’

Financial results for medical liability insurers have deteriorated. Some portion of

these adverse results might be attributed to inadequate knowledge about rates in

newly entered markets and to being very competitive in offering premium discounts

on existing business. However, decisions related to these actions were based on expectations that recent loss and investment markets would follow the same relatively

stable patterns reflected in the mid-1990s. As noted earlier, these results also benefited from favorable reserve development from prior coverage years. Unfortunately,

the environment changed on several fronts ( loss cost levels increased, in several

states significantly; the favorable reserve development ceased; investment yields declined; and reinsurance costs jumped.

While one can debate whether companies were prudent in their actions, today’s

rate increases reflect a reconciliation of rates and current loss levels, given available

interest yields. There is no added cost for past mispricing. Thus, although there was

some delay in reconciling rates and loss levels, the current problem reflects current

data.

Misconception 3: ‘‘Companies are reporting financial losses to justify increasing

rates.’’

This is a false observation. Companies are reporting financial losses primarily because claim experience is worse than anticipated when prices were set. Several companies have suffered serious adverse consequences given these financial results, including liquidation or near liquidation. Phico, MIIX, Frontier, and most recently, the

Reciprocal of America, are all companies forced out of the business and in run-off

due to underwriting losses. Further, the St. Paul Cos., formerly the largest writer

of medical malpractice insurance, has withdrawn from this market. One reason for

this decision is an expressed belief that the losses are too unpredictable to continue

to write the business.

The Academy appreciates the opportunity to provide an actuarial perspective on

these important issues and would be glad to provide the subcommittee with any additional information that might be helpful.

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Mr. DEAL. Thank you very much.

Mr. Brown has asked us to take a break so that we can have Dr.

Singh, who is one of the witnesses that is going to be on the video

conference, hooked up. So I think that is a reasonable request. We

will do that. We will try to do it as quickly as possible.

Mr. BROWN. Thank you. Thank you. And then he will testify

after all of you, but he would—he has been at this conferencing

center at Stanford for 2 hours. He also has a sick child he is trying

to kind of work with, too, but he is—and then he will speak when

everyone else is—he would like to listen to the testimony at least

from Ms. Rosenbaum on, if possible. Thanks.

Mr. DEAL. Dr. Singh, can you hear me?

Mr. SINGH. Yes, I can hear you.

Mr. DEAL. This is Nathan Deal. I am chairman of the Subcommittee on Health. We are pleased to have you join us by way

of this teleconference. We have not arrived at the point of your testimony, but I understood you wanted to hear the other witnesses

that have testified. We have two that have already testified on this

panel, actually three, and we will proceed in order, and you will be

the fourth witness from this point forward. And we will let you

know at that point. But if you can hear, you should be able to hear

the other witnesses. You can still hear us——

Mr. SINGH. Yes, I can hear you.

Mr. DEAL. All right. Good.

Mr. SINGH. I can hear you, but I can’t see anything.

Mr. DEAL. That is the way we like it. We thank you for being

with us. If you will just listen and be patient, we will get to you

in just a few minutes.

Mr. SINGH. Okay.

Mr. DEAL. Our next witness is Sara Rosenbaum from the Department of Health Policy at George Washington University Medical

Center, and we are pleased to have you, Ms. Rosenbaum.

STATEMENT OF SARA ROSENBAUM

Ms. ROSENBAUM. Thank you, Mr. Chairman.

I wanted to focus my observations on H.R. 5 from the last Congress, because I assume that this might be a starting point for the

committee’s deliberations from here on in. And I want to quickly

make just a few points.

The first is that—to the extent that caps on non-economic awards

to yield savings, in the intervening 2 years since the bill passed the

House, NCSL reports many more States have enacted caps on damages of varying amounts. And so the one cautionary note is simply

that the impact of the caps provision probably can be expected to

have declined.

A second point is that, as has been mentioned already a couple

of times, H.R. 5 lacks any safety or quality provisions, which I

think in the intervening 2 years, have become much more important and a much bigger part of the national dialog on health quality. And more importantly, in my view, given the purpose of this

bill, the legislation really does nothing to address what I think is

the most profound problem for medicine today, which is to have to

be on a fault system at all. I think that a fault system, invariably,

no matter how you try and deal with the fault system, produces

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very poor results for everybody involved, including both the physicians and the injured patients.

The third point goes to the corporation shields that are in this

bill. There is a very important shield, which the bill contains, having to do with liability for punitive damages in cases of drugs that

have received pre-market approval. First of all, I will just echo the

point that has already been made, I am not sure why this corporate

shield is in a bill designed to help physicians deal with the high

cost of malpractice premiums. More importantly, this kind of shield

has been expressly disavowed as reliable evidence by the Supreme

Court, in the case of another agency approval standard. And even

more importantly, the shield is so large that, as I sat and thought

about the magnitude of the shield for today’s testimony, it occurred

to me that a distributor who is involved in the deliberate tampering with drugs, would, in fact, be shielded, because the drug

had FDA approval. That is obviously a complete non-secluder, and

yet that is the result of H.R. 5, as it is worded.

A fourth point is that you have elected, in H.R. 5, to use a very

narrow statute of limitations for medical negligence actions. Generally speaking, negligence actions do have short statutes of limitations, except in the case of medical negligence under State law, because it often takes a long time for a medical injury to reveal itself,

and many States, in fact, use much longer periods than you are allowing. So that is an issue to consider.

Finally, and this is something that I observed 2 years ago when

I testified as you were preparing to report H.R. 5, the legislation

contains no rule of construction that reconciles its provisions with

other Federal laws, and as a result, the bill has the affect of turning every civil action that happens to involve a health care corporation into a health care action. I actually don’t think that is what

you intend, but the result is that many, many laws that grant civil

rights that protect against fraud that give private litigants rights

against corporations of various kinds would be converted into

health care actions under the terms of this legislation. And so I

would recommend, once again, the consideration of a limiting

amendment.

Thank you.

[The prepared statement of Sara Rosenbaum follows:]

PREPARED STATEMENT OF SARA ROSENBAUM, HAROLD AND JANE HIRSH PROFESSOR, HEALTH LAW AND POLICY, CHAIR, DEPARTMENT OF HEALTH POLICY, THE GEORGE

WASHINGTON UNIVERSITY SCHOOL OF PUBLIC HEALTH AND HEALTH SERVICES

Good afternoon Mr. Chairman and Members of this Subcommittee. Thank you for

the opportunity to testify before the Subcommittee this afternoon on the important

topic of medical liability reform.

I am a professor of health law and policy at the George Washington University

School of Public Health and Health Services. I have taught, studied, and written

about health law for 20 years following the earlier portion of my career spent in

the representation of low income individuals and families. I am the co-author of one

of the nation’s leading health law textbooks. Over a near-30 year time period, I have

testified before Congress on a broad array of topics in health law and policy.

I would like to focus my remarks on the key elements of H.R. 5, The Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003. It is my assumption that this legislation offers a starting point for the development of legislative policy in the 109th Congress.

The stated purpose of H.R. 5 is to ‘‘improve patient access to health care services’’

and ‘‘[reduce] the excessive burden’’ placed on health care by the current liability

system. According to CBO estimates for HR 5, the impact on medical malpractice

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premiums would range from 0% liability premium savings in one-fifth of all states

(because of state caps already in place) to significantly higher than the 25%-30%

savings norm in about a third of the states. It is important to note in the 2 years

since HR 5 passed in the House, more states have moved to place limits on noneconomic damages. Data available through the National Conference of State Legislatures (NCSL) indicate that as of 2004, only about a dozen states did not impose any

limits. Legislative action by the end of the year may have reduced this number further. It is unclear in my view whether more than a handful of states would be affected by the recovery caps in HR 5, were it to be re-introduced at this point.

It is also important to note that HR 5 contains no provisions to either incentivize

or require efforts to reduce and report on medical errors, despite the fact that the

Institute of Medicine has ranked death from preventable medical errors one of the

nation’s leading causes of death.

In my opinion, the question thus becomes whether provisions such as those found

in HR 5 can be justified in view of the bill’s negligible-to-none impact on the cost

of malpractice premiums, the absence of any impact on the cost of health insurance

premiums, and the absence of any provisions aimed at making recoveries swifter

and fairer for individuals killed or injured by preventable errors. Comparing the

bill’s negligible to no impact on cost and quality against heightened burdens that

it places on injured persons and their families, I conclude that the answer is no.

Key Elements of H.R. 5

H.R. 5 would establish strict federal standards, including caps on non-economic

damages, statutes of limitations, limits on attorney’s fees, damages payouts, collateral source rules, and the procedures and standard of proof necessary to support

claims of punitive damages related to malicious intent or willful and wanton disregard of patient wellbeing. Taken together, these standards can be expected to not

simply curb limits on non-economic damages, but reduce access to lawyers and the

courts because of the procedural constraints and severe limits on recoveries.

The FDA ‘‘Shield’’

Of particular concern in my view is the shield against recovery of punitive damages (which themselves are severely limited) accorded under the legislation. The Act

would prohibit any punitive damages for products that either have received premarket FDA approval or that are ‘‘generally recognized among qualified experts as

safe and effective pursuant to conditions established by’’ the FDA. In other words,

the FDA is not required to have weighed in at all for the shield to be triggered;

‘‘general recognition’’ among ‘‘qualified experts’’ (undefined) would suffice to prevent

the recovery of even modest punitive damages. Furthermore, the shield would protect not only the manufacturer but also its distributor (§ 7(c)), as well as the supplier of raw input materials in manufacturing the product. Protection would be total

no matter how wanton, willful, and intentional the misconduct. It appears that the

Act would shield even negligible punitive damages, even were the claim to involve

intentional product tampering by a distributor of an FDA approved drug.

The rationale underlying the provisions such as the FDA shield in (§ 7(c))—which

is irrebuttable and unprecedented in its breadth—has been explicitly rejected by the

United States Supreme Court. In Bragdon v Abbott 524 U.S. 624 (1998), the Court

refused to recognize CDC universal safety precaution guidelines as irrebuttable

proof of the existence of a safety standard for professionals treating patients with

HIV. The majority noted in their opinion that treating federal agency action as

irrebuttable evidence of what is reasonable is unwarranted, since standards may either be incomplete or rest on an incomplete record and therefore must be independently validated by a court, through the use of objective evidence. Here, the FDA

standard in question is the very pre-marketing standard that has been the subject

of enormous controversy in recent months, as Vioxx and other drug approval scandals have come to light. The conflicts of interest that have emerged in these scandals undermine any notion in my view that an FDA pre-market review standard

would constitute conclusive—or potentially even persuasive—evidence of reasonableness.

Statutes of Limitations

The Act imposes a three-year statute of limitations in all but the narrowest of circumstances. Many states currently use longer statutes of limitations precisely because it can take far longer for the true consequences of medical negligence to manifest themselves. As a result, many states provide for statutes of limitations substantially longer than the typical three year time period granted for ordinary negligence.

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The Eclipsing of Federal Civil Rights and Other Rights

The Act contains no rule of construction reconciling its provisions with other federal laws. In essence, any claim, regardless of its underlying theory, arising out of

any civil action involving health care and involving a health care provider would be

subject to the limitations of the Act.

The term ‘‘health care lawsuit’’ is defined as

any health care liability claim concerning the provision of health care goods

or services or any medical product affecting interstate commerce, or

any health care liability action concerning the provision of health care goods

or services or any medical product affecting interstate commerce, brought in a

State or Federal court or pursuant to an alternative dispute resolution system,

against a health care provider, a health care organization, or the manufacturer,

distributor, supplier, or market, promoter or seller of a medical product, regardless of the theory of liability on which the claim is based or the number of

claimants, plaintiffs, defendants, or other parties, or the number of claims or

causes of action, in which the claimant alleges a health care liability claim.

Such a term does not include a claim or action which is based on criminal liability; which seeks civil fines or penalties paid to Federal State or local government; or which is grounded in antitrust.*** § 9(7)

A ‘‘health care liability action’’ means

A civil action brought in a State or Federal Court or pursuant to an alternative dispute resolution system, against a health care provider, a health care

organization, or the manufacturer, distributor supplier, marketer, promoter, or

seller of a medical product, regardless of the theory of liability on which the

claim is based, or the number of plaintiffs, defendants or other parties, or the

number of causes of action, in which the claimant alleges a health care liability

claim. § 9(8)

A ‘‘health care liability claim’’ means

A demand by any person, whether or not pursuant to ADR against a health care

provider, health care organization, or the manufacturer, distributor, supplier,

marketer or promoter or seller of a medical product*** which are based on the

provision of, use of, payment for (or the failure to provide, use or pay for) health

care services or medical products, regardless of the theory of liability on which

the claim is based*** § 9(9)

THE TERM ‘‘HEALTH CARE GOODS OR SERVICES’’ MEANS

Any goods or services provided by a health care organization, provider or by

any individual working under the supervision of a health care provider that relates to the diagnosis, prevention or treatment of any human disease or impairment or the assessment of the health of human beings. § 9(12)

The popular understanding of this legislation, as reflected in press coverage, is

that it is intended to shield individual clinical practitioners against punishing liability judgments. However, the bill’s actual reach is breathtaking because the Act contains no limiting language.

The sweep of the above-cited definitions effectively means that any claim against

any health care corporation becomes a health care liability claim, thereby permitting a defendant to invoke the bill’s numerous protections. The law’s protections

would appear to be triggered even in cases that do not involve medical injuries in

the medical negligence context, simply because the defendant is a health care corporation: claims involving alleged civil rights violations; claims involving alleged

acts of fraud and corruption on the part of health care companies, brought by

ERISA plans or health care suppliers; and any claim that can be characterized as

a ‘‘demand’’ against a ‘‘provider.’’

Mr. DEAL. Thank you. You did good on time.

Our next witness is Mr. Sherman Joyce from the American Tort

Reform Association. Mr. Joyce, we will recognize you for 5 minutes.

STATEMENT OF SHERMAN ‘‘TIGER’’ JOYCE

Mr. JOYCE. Thank you, Mr. Chairman, Ranking Member Brown,

and members of the subcommittee.

The American Tort Reform Association believes very strongly, as

many of you have echoed, that the case for comprehensive medical

liability reform to cover not just an individual State’s, which has

been referenced, but to be national in scope is very, very strong.

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The American Medical Association has stated that currently 20

States in the United States are in a crisis as a result of our current

medical liability system. And further, 25 more are certainly moving

in that direction and very much in jeopardy of reaching that status

as well.

The reason why this is happening has already been discussed,

and I will just add a couple of pieces of data.

The Physician Insurers Association of America, which is the association of physician and dentist-owned mutual liability insurers

that provide coverage for health care providers, has found that between 1997 and 2003, the median jury award in a medical liability

case nearly doubled from $157,000 to $300,000. Over roughly the

same timeframe, settlements also roughly doubled from $100,000 to

$200,000. Further, in a large number of cases as the PIA has

noted, actually resulted in no verdict, yet the average defense costs

in these cases, because they are very complex, is nearly $88,000,

which is a very high price to pay in terms of costs.

As you have discussed and has been widely reported, access to

health care is threatened, and President Bush made a point of

highlighting this when he visited southern Illinois last week. He

was in Madison County. Madison County, a county that my organization has identified as what we call judicial hellholes. It is the

worst litigation jurisdiction in the country. Its neighboring count,

in St. Claire, together, in the last 2 years of seeing over 160 physicians leave their practice, and it is particularly pronounced, as you

heard, very much along the lines of what the earlier panel talked

about with high-risk specialties.

The American Hospital Association concluded recently that 45

percent of hospitals have reported losses of physicians, with a particular emphasis on emergency room coverage and emergency medicine coverage. You heard of the very tragic case of the young

woman on the previous panel. I think that was probably the most

tragic example of that particular kind of problem.

But the problems go beyond these quantifiable costs and situations. The problem of defensive medicine is a very, very real problem for us as consumers, and also particularly for the Federal Government, which expends large numbers of our tax dollars to pay for

our health care system. And we see estimates of upwards of $28

billion or more could be saved in defensive medicine costs by some

estimates, if we pass good medical liability legislation.

The solution, as you have heard, we believe, is on hand. It has

been the law in California for nearly 30 years. And the experience

there has been very, very positive. According to the National Association of Insurance Commissioners, between 1976 and 2002, insurance premiums rose for physicians outside of California three times

as fast during that timeframe as they did in California. Cases settle faster, which is good for people who have claims. And the costs

are lower. We think it is good for all involved.

The Medical Liability Monitor provide even more compelling

data, highlighting current liability costs—liability insurance costs

for physicians in Los Angeles, Chicago, and Miami. For an ob-gyn,

the insurance averages to about $66,000. In Chicago, it is $147,000.

And in Miami, it is $277,000. I think you can—we can all agree

that that is a very serious matter. Commissioner Montemayor

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talked about what is happening in Texas. They passed legislation,

as have the good people in Mississippi, in response to a very real

crisis there. More needs to be done at the State level.

Let me conclude by making two final points.

The first is that State reform is essential, and we certainly support, but the opportunities are somewhat limited, and a number of

States have actually overturned—State courts have overturned tort

reform and medical liability reform proposals on the basis of State

constitutions. That alone, it seems to me, is an invitation for the

Congress to address this issue.

The final matter that I would point out is that litigation generally does not involve a single plaintiff and a single defendant. It

generally involves multiple parties, sometimes on both sides. We

believe that the rules should apply equally to all parties. We don’t

think that there should be one set of rules with respect to coverage

and compensation for one party and a different set for others. A

fair and balanced set of rules based on what works, we think, is

good public policy and encourage you to take those steps to enact

that.

Thank you.

[The prepared statement of Sherman ‘‘Tiger’’ Joyce follows:]

PREPARED STATEMENT OF SHERMAN JOYCE, PRESIDENT, AMERICAN TORT REFORM

ASSOCIATION

Mr. Chairman, Representative Brown, and Members of the Subcommittee, thank

you for inviting me to speak today on behalf of the American Tort Reform Association (ATRA).

ATRA is a Washington, DC-based membership association of more than 300 large

and small businesses, physician groups, nonprofits, and trade and professional associations having as its mission the establishment of a predictable, fair, and efficient

civil justice system through the enactment of legislation and through public education.

INTRODUCTION

There is no doubt that the American healthcare system is the finest in the world.

We have the best doctors, hospitals, and medical schools. American pharmaceutical

companies are the engine of innovation in creating life-saving medicines. America

has conquered polio, developed cures for serious diseases that were once death sentences, and created technologies and therapies that have not only improved the

American people’s health, but also the world’s.

Unfortunately, we also know that our healthcare system costs are a major issue

for consumers and elected officials, with annual costs increasing at double digit

rates. This increase threatens the very greatness of our healthcare system, and ultimately the American people’s access to world class medical care. While elected officials at the federal and state level discuss possible solutions to this problem, be they

medical savings accounts or a single-payer healthcare system, one of the contributing factors to the healthcare cost problem is the crisis in our medical liability system. ATRA believes that Congress should consider reforms to our medical liability

system as one of the critical elements to reform our healthcare system.

THE PROBLEM: THE CURRENT MEDICAL LIABILITY SYSTEM IS INADEQUATE

An effective medical liability system should provide predictability and fairness,

guided by the over-arching principle of fairly compensating those who are truly injured by medical negligence.

Unfortunately, our medical liability system comes up short.

In our system, costs are escalating astronomically. According to the Physicians Insurers Association of America, a trade association composed of 50 insurance companies owned by doctors and dentists, the median medical liability jury award nearly

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1PHYSICIANS INSURERS ASSOCIATION OF AMERICA, PIAA CLAIM TREND ANALYSIS: 2003 ed.

(2004) [hereinafter ‘‘PIAA TREND ANALYSIS’’ (2004)]. 2 Id.

3 Id.

4 Id.

5Fifty-eight cents from every dollar recovered goes to administrative and defense costs, as well

as attorneys’ fees. See COUNCIL OF ECONOMIC ADVISERS, WHO PAYS FOR TORT LIABILITY CLAIMS?

AN ECONOMIC ANALYSIS OF THE U.S. TORT LIABILITY SYSTEM 9 (April 2002). 6See PIAA TREND ANALYSIS (2004), supra note 1. 7 Id.

8See OFFICE OF THE ASSISTANT SECRETARY FOR PLANNING AND EVALUATION, U.S. DEPART- MENT OF HEALTH AND HUMAN SERVICES, CONFRONTING THE NEW HEALTH CARE CRISIS: IMPROV- ING HEALTH CARE QUALITY AND LOWERING MEDICAL COSTS BY FIXING OUR MEDICAL LIABILITY

SYSTEM 11 (Jul. 24, 2002) [hereinafter ‘‘HHS REPORT (2002)’’] . 9David Kessler and Mark McClellan, Do Doctors Practice Defensive Medicine? QUARTERLY

JOURNAL OF ECONOMICS, May 1996, at 387-388. 10See HHS REPORT (2002), supra note 8, at 7. 11 AMERICAN HOSPITAL ASSOCIATION, PROFESSIONAL LIABILITY INSURANCE SURVEY (2003). 12WINSTON-SALEM JOURNAL, June 3, 2003. 13KTVO, April 30, 2004.

doubled from $157,000 in 1997 to $300,000 in 2003.1 The average award also increased from $347,134 in 1997 to $430,727 in 2002.2 The growth in settlements followed this trend, with the median settlement increasing from $100,000 in 1997 to

$200,000 in 2002.3 Average settlements increased from $212,861 in 1997 to

$322,544 in 2002.4

In addition to sharp escalation in costs, however, the medical liability system is

highly inefficient.5 Prompt and full compensation to injured plaintiffs are the exception and not the rule. A full 70 percent of medical liability claims result in no payment to the plaintiffs.6 Of the 5.8 percent of claims that do go to a jury verdict, defendants won 86.2 percent of the time, with an average cost to defend such lawsuits

of $87,720 per claim.7

In addition to being expensive and inefficient, the system does a poor job of promoting patient safety. Only 1.53 percent of patients injured by medical error file

claims and most claims that are filed do not involve medical malpractice.8 Such a

system plainly fails to serve the interests of all parties to litigation.

NEGATIVE POLICY IMPLICATIONS OF THE STATUS QUO

Doctors routinely order unnecessary tests and procedures to guard against the

possibility of litigation in the aftermath of a bad outcome. According to a study published in the Quarterly Journal of Economics, the excess cost of defensive medicine

contributes $50 billion annually to the cost of our healthcare system.9 Through programs such as Medicare and Medicaid, the federal government pays tens of billions

of dollars to pay the costs associated with defensive medicine. According to a recent

HHS report, between $28.6 and $47.5 billion per year in taxpayer funds is spent

indirectly subsidizing this system.10 These increased costs in a financially overburdened healthcare system reduce both the access to and quality of healthcare. The

root of this problem is an unpredictable litigation system in which the volatile nature of jury verdicts provides no clear signals and predictability to healthcare providers and insurers.

IMPACT ON PHYSICIANS

The current costs of the litigation system impose burdens on taxpayers and individual physicians. This compromises innovation in delivering improvements to patient safety. The result is a medical liability system that is too costly, offers little

deterrent value, and, at best, does little to promote improvements in patient safety.

For example, the American Hospital Association has reported that 45 percent of hospitals have lost physicians and/or reduced coverage in emergency departments due

to the medical liability crisis.11 Stories about individual physicians are equally compelling. For example, after serving 30 years as medical director for Forsyth County

Emergency Medical Services of North Carolina, Dr. Lew Stringer resigned his position in 2003 due to the lack of availability of affordable malpractice insurance.12

And in Missouri, family physician Dr. Donald Maples closed his practice after serving the community of Kirksville for 14 years because of the high cost of his medical

liability insurance. Commenting on his experience, Dr. Maples said, ‘‘I expected to

be here until I was in my mid-60s, but the reality is that I can no longer really

truly afford to do this.’’ 13

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14See HHS REPORT (2002), supra note 8, at 4. 15See Health Coalition on Liability and Access, available at http://www.hcla.org/factsheets/

2004-HCLA-Poll-(Fact%20Sheet).pdf. 16WILKES-BARRE CITIZENS VOICE, January 8, 2005. 17See Pennsylvania Economy League, available at http://www.issuespa.net/polls/point/10295/

10281/. 18The American Tort Reform Foundation published an analysis of the worst trial court jurisdictions in the country, known as ‘‘Judicial Hellholes ’’ where the law is applied in a systematically unfair and unbalanced manner, generally against defendants. Madison County is ranked

as the number one Judicial Hellhole in the United States, with Saint Clair County being ranked

as number two. The 2004 Judicial Hellholes report is available at http://www.atra.org/reports/

hellholes/report.pdf. 19President Discusses Medical Liability Reform, available at http://www.whitehouse.gov/news/

releases/2005/01/print/20050105-4.html. 20 UPI, February 25, 2004. 21See Californians Allied for Patient Protection, MICRA Information, July 1, 1995, at 10. 22 Noneconomic damages are monetary awards intended to compensate the plaintiff for subjective losses such as physical pain and suffering, mental anguish, loss of body function, disfigurement, or emotional distress. This differ from economic damages which are monetary awards intended to compensate the plaintiff for objective quantifiable losses such as property loss, medical

expenses, lost wages, or lost or impaired future earnings capacity.

PATIENT ACCESS TO HEALTHCARE IS COMPROMISED BY CURRENT LIABILITY SYSTEM

A survey of physicians showed that over 76 percent believed malpractice litigation

affected their ability to provide quality healthcare.14 According to the American

Medical Association (AMA), 20 states are in the midst of a healthcare liability crisis,

while another 25 states show problem signs that indicate a crisis is imminent.

ATRA believes that this litigation environment has resulted in many physicians

stopping the practice of medicine, abandoning high-risk parts of their practices, or

moving their practices to other states. The public has taken notice, as well. According to a nationwide survey commissioned by the Health Coalition on Liability and

Access, 82 percent of Americans believe doctors are leaving their practices due to

unaffordable malpractice premiums caused by excessive litigation.15

For example, on January 10, 2005, Mercy Hospital of Wilkes-Barre, Pennsylvania,

stopped delivering babies because of the retirement of several OB/GYNs due to the

high cost of medical liability insurance.16 Pennsylvania has been hit hard by the

medical liability crisis, with a 2004 poll suggesting that one in four patients have

changed doctors in the Keystone state due to the medical liability crisis.17

In early January, President Bush visited Southern Illinois to discuss the medical

liability crisis. The President pointed out that Madison and St. Clair Counties 18 had

lost about 160 doctors over the last two years due to the medical liability crisis.19

High-risk specialists have been particularly hard hit; in 2004, the last two brain

neurosurgeons in Southern Illinois resigned their posts at Neurological Associates

of Southern Illinois because their malpractice insurance premiums were approaching $300,000.20

SOLUTION

Fortunately, there are proven policy changes that Congress can enact to abate

this liability crisis. These laws can ensure Americans will continue to enjoy high

quality medical care. At the same time, these reforms will protect the rights of patients in cases of true medical negligence. As Congress contemplates a legislative

remedy, ATRA believes that any such legislation should apply to all defendants in

healthcare actions. Doing so will ensure that all parties in a claim are treated equitably in the civil justice system.

The solution to the medical liability problem was devised over 25 years ago in

California with reforms called the Medical Injury Compensation Reform Act, better

known as MICRA. Like much of the United States today, California experienced a

medical liability crisis in the early 1970s. By 1972, a sharp increase in litigiousness

ensured that California medical malpractice insurance carriers were paying claims

well in excess of dollars that they collected in premiums. The crisis continued to

worsen. By 1975, two major malpractice carriers in Southern California notified

physicians that their coverage would not be renewed. At the same time, another insurer announced that premiums for Northern California physicians would increase

by 380 percent.21 In response to the crisis, then-Governor Jerry Brown called the

California Legislature into special session to develop solutions. The result was

MICRA.

Signed by Governor Brown in 1975, MICRA’s centerpiece is a single cap of

$250,000 on noneconomic damages.22 Other provisions of MICRA include: (1) allowing collateral source benefits to be introduced into evidence; (2) permitting the periVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00111 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
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23See American Medical Association, Medical Liability Reform-Now!, December 3, 2004, at 40. 24See The Doctors’ Company, What is MICRA?, available at http://www.thedoctors.com. 25See Californians Allied for Patient Protection, MICRA: A Successful Model for Affordable

and Accessible Health Care, available at http://www.micra.org. 26The Florida Legislature passed medical liability reform, CS SB 2-D, during special session

in August 2003. The bill contained a high cap on noneconomic damages. CS SB 2-D became effective on September 15, 2003. 27 Rates are for 2004, $1/$3 million coverage as reported by Medical Liability Monitor. Los Angeles rates reported from SCPIE Indemnity Co., Chicago rates reported from Illinois State Medical Ins. Services, Inc., and Miami rates reported from First Professional Insurance Company. 28See HATTIESBURG AMERICAN, October 10, 2004, at 8. 29See HOUSTON CHRONICLE, September 21, 2004, at 5. 30 Id.

odic payment of judgments in excess of $50,000; (3) allowing patients and physicians

to contract for binding arbitration; and (4) limiting attorney contingency fees according to a sliding scale.

CALIFORNIA—A COMPARISON

Evidence indicates that MICRA’s success has stabilized insurance rates in California by limiting overall damages and by substantially diminishing the unpredictability—the volatility—of judgments. For example:

• From 1976 through 2002, malpractice premiums in California rose 245 percent.

In the rest of the country, premiums increased 750 percent; 23

• Medical liability lawsuits in California settle on average in 1.8 years, while the

same lawsuits in states without limits on noneconomic damages settle on average in 2.4 years—33 percent longer; 24 and

• Medical liability lawsuits in California settle for an average of $15,387; the same

lawsuits in states without limits on noneconomic damages settle for an average

of $32,714—53 percent more.25

While these figures make the case that MICRA has worked, an even more compelling argument for its success can be made by comparing malpractice rates for California physicians with their counterparts in other major metropolitan areas of states

without MICRA-style reforms.26 For example: 27

• A Los Angeles area internist pays $13,808; an internist in Chicago pays $38,424,

and in Miami pays $69,310;

• A Los Angeles area general surgeon pays $40,436; a general surgeon in Chicago

pays $102,700, and in Miami pays $277,241; and

• A Los Angeles OB/GYN pays $66,100; an OB/GYN in Chicago pays $147,540, and

in Miami pays $277,241.

MICRA has ensured that those injured by medical negligence receive fair compensation, but it also has ensured that the market for medical liability insurance

has remained stable and affordable. As a result, California has been largely immune

from the liability crisis endemic to other states.

RECENT EXAMPLES OF REFORMS: MISSISSIPPI AND TEXAS

Over the last two years, Mississippi and Texas passed significant medical liability

reform legislation to rein in skyrocketing malpractice premiums. In July 2004, Mississippi Governor Haley Barbour signed House Bill 13, comprehensive civil justice

reform legislation, which contained significant medical liability reform provisions.

One of the key provisions was a $500,000 limit on noneconomic damages in medical

liability cases. Positive results are already being seen as the Medical Assurance Co.

of Mississippi, which insures approximately 60 percent of doctors in Mississippi, did

not raise base premium rates for 2005.28 The story is much the same in Texas. In

the summer of 2003, Governor Rick Perry signed House Bill 4, comprehensive civil

justice reform legislation containing meaningful medical liability reform, including

a $750,000 limit on noneconomic damages ($250,000 per healthcare provider). As a

result, the largest medical malpractice provider in the state, the Texas Medical Liability Trust, lowered rates by 12 percent for 2004 and an additional 5 percent for

2005.29 According to Lieutenant Governor David Dewhurst, 13 new companies have

started writing policies in Texas.30 The recent experiences of both Misssissippi and

Texas confirm that MICRA-style reforms have a positive impact in reining in medical malpractice rates.

OPPONENT ARGUMENTS ARE INCOMPLETE

Opponents of medical liability reform claim that the ‘‘access to healthcare’’ problem is a myth and that MICRA-style reforms are not the solution to rising malVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00112 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
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31 Raghu Ramachandran, Brown Brothers Harriman & Co., Did Investment Affect Medical

Malpractice Premiums? (January 2003). 32See Patient Access: The Role of Medical Litigation Before a Joint Hearing of the United

States Senate Judiciary Committee and Health, Education, Labor and Pensions Committee (Feb.

11, 2003) (statement of Lawrence E. Smarr, President, Physician Insurers Association of America). 33See GOVERNMENT ACCOUNTING OFFICE, MEDICAL MALPRACTICE: IMPLICATIONS OF RISING

PREMIUMS ON ACCESS TO HEALTH CARE 5 (August 2003) [hereinafter ‘‘GAO Report’’ (2003)]. 34See GAO Report (2003), supra note 33, at 5.

practice premiums. One of the most common arguments they advance is that malpractice rates are increasing because insurance companies are making up for investment losses suffered in the stock market bubble in the late 1990s. They further

argue that insurance carriers are gouging doctors with rate increases to boost profits.

A brief examination of the evidence, however, suggests otherwise. A report by the

investment and asset management firm Brown Brothers Harriman examined the investment mix of medical liability insurance carriers and the effect those investments

had on premiums. The Brown Brothers report found no relationship between losses

suffered by carriers in the stock market and rising premiums, ‘‘As medical malpractice companies did not have an unusual amount invested in equities and since

they invested these monies in a reasonable market-like fashion, we conclude that

the decline in equity valuations is not the cause of rising medical malpractice premiums.’’ 31

In addition, more than 60 percent of physicians obtain insurance through physician owned and operated companies.32 These companies began to form in the 1970s

when commercial carriers were exiting the medical liability insurance market due

to unexpected losses, leaving healthcare providers no other options but to form their

own insurance companies. These companies compete with commercial carriers and

return excess revenue to policy holders, the owners of the companies. The contention

that malpractice premiums are increasing in an effort to boost profits is, in essence,

asking us to believe that a majority of doctors are ‘‘gouging’’ themselves and picking

their own pockets. A reasonable examination can reach only one conclusion: medical

liability insurance premiums are increasing because of higher costs and instability

of our current litigation system, which does not allow carriers to accurately predict

future losses and provide reasonable pricing of liability policies. Insurers price their

product on cost and risk. It is logical to infer that a medical liability system that

is more expensive and more volatile will necessarily be more expensive to insure.

A 2003 Government Accounting Office (GAO) study examined the impact of the

medical liability system on access to healthcare. The report acknowledged that

states that limit noneconomic damages have enjoyed a lower rate of increase in

medical liability insurance rates than states with more limited reforms.33 As our opponents are quick to point out, however, the report also alleged that there is little

evidence to suggest that states with no limits on damages have a healthcare access

problem. 34

The report is incomplete. GAO examined only a limited number of states, 5, and

not the entire 18 then in crisis, as identified by the AMA at the time that the GAO

conducted its examination. It has never been ATRA’s position that the effects of the

medical liability crisis are uniform. Many variables drive the crisis, including the

type of medical specialty, the physician’s location (urban, rural, or suburban), and

the overall litigation environment of a particular region. In some areas and among

some specialties, the effects of the current crisis are minimal; in other areas, and

many other specialties, the effects of the crisis are profound.

CONCLUSION

Members of Congress should examine the medical liability system and assess the

effects that current cost escalation and litigation will have on the future. ATRA believes such an examination inevitably leads to the conclusion that the costs associated with the current system are unsustainable and that MICRA-style reforms must

be enacted. Such reforms are in the best interests of patients, taxpayers, physicians,

and plaintiffs. And these reforms should apply to all defendants in litigation. As

Californians can attest, strong medical liability reforms create a system that strikes

the correct balance between fairly compensating victims of medical negligence with

a liability market that stabilizes premiums for physicians. This reform will go a long

way toward enhancing and protecting access to healthcare. Lawmakers should not

wait to act until a full-blown crisis is verified by a government report. It is the responsibility of elected officials to take remedial and, if necessary, preventive action

to ensure that such a crisis never occurs.

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Thank you for your attention, and I would be happy to answer any questions.

Mr. DEAL. Thank you.

Our next witness is Dr. Joseph Glenmullen from the Harvard

Law School. Dr. Glenmullen, we are pleased to have you, and you

are recognized for 5 minutes.

STATEMENT OF JOSEPH P. GLENMULLEN

Mr. GLENMULLEN. Thank you, Mr. Chairman.

I am here particularly to talk about the pharmaceutical company

shield that is under discussion. I am a psychiatrist who practices

at the Harvard Law School Health Services and also in private

practice. I am on the faculty at Harvard Medical School and the

author of two books on antidepressant side effects: ‘‘Prozac Backlash’’ and ‘‘The Antidepressant Solution.’’ I am very much a moderate in the debate about antidepressants, because I prescribe the

drugs to many patients who have reported their benefits, but I

have been a critic of patients not being adequately warned about

their side effects.

I am sure you are aware of the historic 2005 FDA warning. It

is a black box warning that antidepressants can make children and

adolescents suicidal, especially whenever the dose changes, and

that this is suicidality over and above any that results from the underlying illness. Numerous families testified at the FDA hearings

last year about losing children or having children survive this terrible side effect, and I am here because I have witnessed this side

effect firsthand in patients who I was treating and know full well

how important it is for doctors to be well educated about how to

differentiate antidepressant-induced suicidality from the suicidality

that can occur in depression.

Unfortunately, both the FDA and the pharmaceutical industry

knew over a decade ago about this side effect. Shortly after Prozac,

the first of today’s antidepressants, was introduced in the early

1990’s, there were multiple reports in prominent medical journals

and media attention greater than there is today. The FDA held a

hearing in September 1991 at which, unfortunately, the issue was

swept under the carpet. Numerous conflicts of interest among the

committee members the FDA appointed. But despite that, one-third

of them voted in 1991 for a warning and repeatedly called for additional research.

I have given you some documents in the slide preparation of internal Eli Lilly documents that came out of lawsuits against the

company, showing that Eli Lilly agreed in the early 1990’s to do

the gold standard research, developed a full protocol for the study,

involved as many as 100 scientists, and as part of the effort, developed a more sensitive scale for assessing antidepressant-induced

suicidality. Unfortunately, once the media attention died down, Eli

Lilly never did the study, saying in a later lawsuit that it was

mooted by the FDA hearing, but anyone who reads the transcript

of that hearing would know how untrue that is.

The FDA not only failed to get the study done, but it failed to

have other companies that had new antidepressants in the pipeline

adopt the more sensitive scale for assessing antidepressant-induced

suicidality.

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These are just a few of countless internal company memos that

have literally changed health care, literally changed the way doctors and I can diagnose antidepressants’ side effects and treat them

and, therefore, save lives and also contributed to the momentum

that resulted in the 2005 warnings. Without these lawsuits, we

would be without a vital avenue for protecting the public.

The FDA has still not done enough to protect American children.

It hasn’t adequately filled out the warning in terms of the relationship between antidepressant-induced suicides and antidepressant

withdrawal reactions. It hasn’t done enough to limit off-label prescribing of the drugs. Only Prozac is approved for depression in

children, and yet a million American children are taking all kinds

of other antidepressants for everything from shyness to headaches

to school anxiety to attention deficit disorder. I don’t understand

how the FDA can let this happen after acknowledging that these

drugs can make children suicidal.

The FDA has also failed to adequately educate the public and

doctors about the meaning of this side effect and how to differentiate it from underlying suicidality of depression. In fact, the most

dangerous scenario is when neither doctors nor patients are well

informed about this side effect. Patients get it, deteriorate, and

think, ‘‘Oh, my God, the miracle cure that has worked for millions

of people is not working for me,’’ and are at serious risk to kill

themselves.

This side effect can happen to anyone on an antidepressant, even

people doing well on a stable dose. The research shows that most

patients will forget to take their antidepressant for 2 or 3 days, and

with many of these drugs, that is all it takes to be in severe

antidepressant withdrawal, which can make people suicidal.

I really think that the issue of the pharmaceutical company

shield—I hope you will think of it as a very personal question.

What if one of your children or one of your grandchildren was

under consideration for an antidepressant? Would you want the

doctors treating them to have all of the information that the pharmaceutical companies have about these drugs, or would you prefer

that the pharmaceutical companies control access to that information and withhold much of it, as we have learned in the last decade? If you would want doctors treating your family members to

have access to this information, please do not vote along partisan

party lines. Instead, vote to protect this vital source of protection

for the American public.

Thank you very much.

[The prepared statement of Joseph P. Glenmullen, follows:]

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Mr. DEAL. Thank you.

Have we got Dr. Singh’s microphone turned on on the other side?

Dr. Singh, you can still hear me?

Mr. SINGH. Yes, I can hear you.

Mr. DEAL. All right. Well, we are to your point in the testimony.

And Dr. Singh is an adjunct professor of medicine at Stanford University, and we are pleased to have you, and we thank you for your

patience in waiting on us to get to you.

Now you have the feeling that most politicians have when they

are being interviewed. That is, you can’t see us, but we can see

you.

We are pleased to having you recognized for 5 minutes.

STATEMENT OF GURKIRPAL SINGH

Mr. SINGH. Thank you very much, chairman, ladies, and gentlemen.

I am a rheumatologist by clinical training with research interests

and expertise in drug safety and epidemiology. My complete background, as well as my complete testimony, are made available to

you, and you should have photocopies of those. I am not going to

read all of it in—because I only have 5 minutes, and I would only

highlight some important significant features of my testimony. But

I would be happy to answer questions on any of the points that I

have raised in my written testimony.

I have been specifically asked to comment on the notion that the

FDA represents an effective, concerned, and independent regulatory entity that can be relied upon to require and accurately analyze, in a timely manner, all information necessary to assess a drug

or a device’s safety and efficacy profile and that it promptly informs

the prescribing and patient community through complete and accurate and understandable labeling.

I will use the case example of Vioxx to illustrate some of the

points made in this particular statement.

First of all, let me start by stating for the record my admiration

for the FDA scientists and medical reviewers. They are clearly

some of the smartest individuals in the medical field and have

dedicated their lives to public service. They work long hours in jobs

that are mostly invisible to the public they try to protect for salaries that are a fraction of what they could make outside the FDA.

But they work within a system that is far from perfect, witness the

Vioxx and antidepressant episodes.

The first problem is that clinical trials designed before the approval of a drug are not designed to study drug safety. They are

designed, in the current system, only to look at drug efficacy. This

means that there are a small number of patients who are followed

for short periods of time in selected populations and therefore you

would be very likely to miss early safety signals.

To assess safety, we need to do studies after the drug’s approval,

the so-called post-marketing studies, but these are rarely completed. You saw an example from the previous speaker as well. In

the current system, a drug is considered safe until proven otherwise. While this system does bring rapid drug approval, it raises

the possibility of sometimes causing serious harm.

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No. 2, and this is the problem, the system is designed for rapid

drug approval, not a careful review of drug safety. For example, in

the case of Vioxx, you will see medical testimony that I will quote

these reviewers from the Food and Drug Administration who pointed out that there were already significant problems with heart attacks, a threefold increase in the risk of heart attacks, seen in the

data that Merck submitted to the FDA for the approval of the drug.

And the reviewer went on to say that this available data, the studies are still very small, and it is impossible to answer, with complete certainty, whether the risk of cardiovascular and

thromboembolic events is increased in patients on Rofecoxib. And

she says a larger data base will be needed to answer this and other

safety comparison questions.

So what happens next? Does the FDA require Merck to conduct

larger and more definitive studies? No. Remember, the system is

designed for rapid drug approvals. So the drug is approved quickly

by the FDA and applied to review within 6 months with no discussion of the heart attack tradeoff. The system works at a cost that

we will all know many years later.

No. 3, there is no mechanism for conditional or time-limited approval. Once a drug is approved, the FDA has little power to force

a drug company to do safety studies. Again, I will give you repeated examples in my written testimony when this happened with

Rofecoxib. The FDA repeatedly noted that adequately powered and

prospectively designed studies are necessary to address the cardiovascular safety issues with Vioxx. But Merck would not do that

and, in fact, canceled the only study that could have provided an

answer in 2002, and the reason is because they said it would send

the wrong marketing and public relation signal. Why ask the question if you do not want to know the answer? Instead, they proposed

a pooled analysis of ongoing clinical trials, which is not a very effective way to look for these signals. And the FDA recognized that,

but really did not have any way of forcing the drug company to do

safety studies.

So life goes on, millions of people keep on taking the drug, the

drug company makes billions of dollars of profits, nobody knows

what is happening, and the band plays on.

No. 4, there is no good mechanism of informing the prescribing

physician or the public of FDA’s concerns. Again, to look at the

Vioxx example, the drug company had unlimited resources, millions

and millions of dollars to launch a direct to consumer campaign,

held physician meetings, you know, do scientific presentations to

point out their view of the safety of the drug. The Food and Drug

Administration differed in their views, but there was no way for

the public to know about that. I mention in my written testimony

many instances when written published material from the drug

company were in direct conflict with what the FDA had found, but

everybody only heard one side of the picture. We did not know

what the FDA was thinking. Why does the FDA not publish its

own findings in medical journals? Why do the FDA reviewers not

go to scientific meetings and present their data, their interpretation of the data, so that we understand better both sides of the picture?

[The prepared statement of Gurkirpal Singh follows:]

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PREPARED STATEMENT OF GURKIRPAL SINGH, ADJUNCT CLINICAL PROFESSOR OF

MEDICINE, DEPARTMENT OF MEDICINE, DIVISION OF GASTROENTEROLOGY AND

HEPATOLOGY, STANFORD UNIVERSITY SCHOOL OF MEDICINE

Chairman Barton, Congressman Dingell, and Ladies and Gentlemen:

Thank you for inviting me to testify before the Subcommittee on Health of the

Committee on Energy and Commerce.

I am a rheumatologist by clinical training with research interests and expertise

in drug safety and epidemiology. My group and I at Stanford University were instrumental in pointing out the risks of painkillers such as ibuprofen (Motrin) and

Aleve (a class of drugs called NSAIDs). Our NIH sponsored research over the years

has allowed us to identify patients who have a high risk of serious stomach bleeding

from such drugs and potential ways to avoid such risks. I have been working in this

research area of drug safety and outcomes research for almost 15 years, and have

published extensively in the medical literature. I am currently working with large

public datasets such as Medicare and Medicaid to study early safety signals of medications. I lecture medical students, residents and other physicians, both at Stanford,

and in conferences worldwide, on many of these issues.

I have been asked to comment on the notion that FDA represents an effective,

concerned and independent regulatory entity that can be relied upon to require and

accurately analyze in a timely manner all information necessary to assess a drug

or device’s safety and efficacy profile and that it promptly informs the prescribing

and the patient community through complete and accurate and understandable labeling. I will use the example of the approval and withdrawal of rofecoxib (Vioxx)

as a case-study. It is not my intention to catalogue all the errors made, but rather

to highlight the lessons that we have learnt and the knowledge that we can derive

from this episode so that early signals are not missed again with another drug.

First of all, let me start by stating for the record my admiration for the FDA scientists and medical reviewers. They are some of the smartest individuals in the

medical field, and have dedicated their lives to public service. They work long hours,

in jobs that are mostly invisible to the public they try to protect, for salaries that

are a fraction of what they could make outside the FDA. But they work within a

system that is far from perfect—witness the Vioxx and anti-depressant episodes.

1. PRE-APPROVAL CLINICAL TRIALS ARE NOT DESIGNED FOR STUDYING DRUG SAFETY

In a clinical trial, patients are assigned randomly to receive the study drug or the

comparison treatment, and they are followed for the health outcomes of interest.

The clinical trial is the optimal method of assessing the efficacy of medications, but

often not its safety. For example, clinical trials to study the efficacy of an arthritis

pain medicine can be conducted in a few hundred patients who are followed for 6

weeks. But such a study is too small to evaluate the effects of a medication on

health outcomes such as heart attack or stroke. Studies of thousands of patients followed for several years are often needed to provide confidence in the evaluation of

these outcomes. And therein lays a problem. The current system of drug approval

at the FDA relies on clinical trials designed for efficacy—while these trials provide

information to evaluate if the drug works, there are very often not sufficient to assess its safety.

Another problem is the fact that many clinical trials are performed in an ‘‘optimal’’ population, and exclude people who may be at risk for suffering the maximum

harm from a drug—such as those with a weak heart or the elderly or pregnant

women. So, there is little safety data collected in these high-risk populations.

In the current system of drug approval, trials designed to assess the safety of a

drug are often performed after its approval—the so-called post-marketing studies.

But these are rarely completed. A drug is considered ‘‘safe’’ unless proven otherwise.

While this system brings rapid drug approvals, it does raise the rare possibility of

sometimes causing serious harm from side-effects not discovered in clinical trials.

2. THE SYSTEM IS DESIGNED FOR RAPID DRUG APPROVAL, NOT A CAREFUL REVIEW OF

DRUG SAFETY—THE VIOXX EXAMPLE.

The first principle of medicine is primum, non nocere—first do no harm. It is extremely important that clinical trial data be carefully studied and if there is any

indication—even a small one—that there is a possible risk of serious harm, the approval of the drug should be deferred till appropriate large-scale data is collected.

How well equipped are we to do that today? Let me illustrate with the Vioxx example.

When Merck filed for the approval of Vioxx in the US, it submitted data on 58

studies (that included 3629 patients treated with Vioxx) to the FDA. However, only

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371 and 381 patients had received doses of 12.5 mg or 25 mg for more than 1 year,

and only 272 had received doses of 50 mg for at least 6 months. These studies were

adequate to study the efficacy of Vioxx on pain relief, but did not have enough

power to look at serious adverse vents such as heart attacks and strokes. Nevertheless, there were early signs of serious problems. In a careful FDA review of Merck’s

new drug application for Vioxx, Dr. Villalba (exhibit 10) noticed (and I quote) that

‘‘thomboembolic events [such as heart attack and stroke] are more frequent in patients receiving VIOXX than placebo . . .’’ [page 105]. Among 412 patients taking placebo, 1 had a cardiovascular event (0.24%). In contrast, among the 1631 patients

receiving 12.5 mg or more of VIOXX daily, 12 had a cardiovascular event (0.74%)

(6)—a three-fold increase in risk. Many scientists would consider this three-fold difference as an early warning sign. But at that time, there were no adequate data

to make a firm conclusion one way or another. In fact, the FDA reviewer went on

to point out that: ‘‘With the available data, it is impossible to answer with complete

certainty whether the risk of cardiovascular and thromboembolic events is increased

in patients on rofecoxib. A larger database will be needed to answer this and other

safety comparison questions’’ [page 105].

What happens next? Does the FDA require Merck to conduct larger and more definitive studies? After all, the drug was no more effective than any other available

pain-killer in the US—and there were nearly 30 such drugs available in the US.

Further, another drug—the cox-2 inhibitor celebrex—which had no such signal for

heart attacks had been already available in the US market 6 months prior. A combination of two older drugs—a pain-relieving drug such as motrin with a drug that

protects the stomach such as prilosec—is as effective and almost as safe on the

stomach as Vioxx, with no heart attack risk. There was certainly no emergent need

to approve Vioxx without further studies if there were lingering safety concerns. The

trade-off of heart attacks for the rare instances of stomach bleeds is not a reasonable one. Remember, primum non nocere—first, do no harm. Instead, the drug was

approved by the FDA in a priority review within 6 months—with no discussion on

the heart attack trade-off. The system that is designed to approve drugs rapidly

works—at a cost that we all know now.

3. THERE IS NO MECHANISM FOR CONDITIONAL OR TIME-LIMITED APPROVAL.

Once a drug is approved, the FDA has little power to force a drug company to

do safety studies. Let us look at Vioxx. From the time the NDA was filed to the

ultimate withdrawal of the drug, FDA medical reviewers repeated noted the increase in heart problems with the drug, in multiple studies. The signals were not

definitive because there were no large safety studies. FDA reviewers repeatedly

noted the need for such studies. On March 12, 2002, Dr. Villalba wrote to Dr.

Goldkind (Deputy Division Director): ‘‘Adequately powered and prospectively designed studies are necessary to definitively address cardiovascular safety issues

with Vioxx’’. Merck would not do any, and in fact, cancelled the one study that could

have provided the answer in 2002. The New York Times recently reported that

Merck decided a cardiovascular outcome study would send the ‘‘wrong’’ marketing

and public relations signal. Why ask a question if you do not want to know the answer? Instead Merck proposed a pooled analysis of ongoing clinical trials for new

indications. On December 19, 2002, the FDA sent a letter to Merck stating that this

approach ‘‘. . . might not be sufficient to address the ongoing cardiovascular safety

concerns surrounding Vioxx.’’

Four years before the withdrawal of Vioxx, the FDA had ‘‘ongoing cardiovascular

safety concerns surrounding Vioxx’’. Concerns that had started before the drug was

approved. Yet, the sponsor would not do definitive studies to address these safety

concerns. So what happens—life goes on, millions of people take the drug, blissfully

unaware of ‘‘ongoing cardiovascular safety concerns’ of their regulatory agency. And

the band plays on...

It is my recommendation that a system of conditional or time-limited approvals

should be instituted. This way, if there are any emerging safety problems with a

drug after its approval, the FDA can require companies to do large safety studies

within a certain time period.

4. THERE IS NO GOOD MECHANISM OF INFORMING THE PRESCRIBING PHYSICIANS OR

PUBLIC OF FDA’S CONCERNS.

In my opinion, this is the single most important problem of communication with

the system. While the drug companies spent hundreds of millions of dollars in touting the benefits of their drugs in direct-to-consumer advertisements and sales calls

to physicians, the FDA has no way to inform the public of its concerns, except

through a process of label change.

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Again, let us look at the Vioxx example. Multiple studies published by Merck in

medical journals underplayed the risk of serious cardiovascular complications. The

VIGOR trial was published in the New England Journal of Medicine, once of the

most reputed medical journals in the world. However, the publication under-reported the true number of heart attacks in patients on Vioxx. (Four years later,

Merck would say that those were preliminary numbers—but did the publication say

that at that time?). While it prominently discussed the 50% reduction of stomach

bleeds in patients taking Vioxx, it did not mention that in spite of this, patients on

Vioxx had more serious adverse events, more hospitalizations and more deaths than

patients on Naproxen. In addition, the true rates for cardiovascular thrombotic adverse events (a prespecified study endpoint in the protocol), hypertension and congestive heart failure, factors that may contribute to heart attacks and which were

all higher in the Vioxx group—were not shown in the paper at all. The FDA knew

the truth—but these concerns were never communicated to the prescribing physicians or public. In February 2001, the FDA put the correct numbers on its website—

but how many physicians know how to navigate the FDA website? Why could the

FDA not publish its own findings in the New England Journal?

In March 2000, Merck sent a letter to all its investigators to encourage the use

of aspirin in patients on Vioxx who may be at risk for cardiovascular complications.

For the next 4 years, Merck sales force would tell prescribing physicians that the

use of aspirin would eliminate the increased heart attack risk seen with Vioxx. But

studies that the FDA reviewed suggested that this was simply not true. For example, in a document released to public last week, Dr. Villalba’s review of the ADVANTAGE study on November 28, 2001 states: ‘‘the use of low dose ASA for cardiovascular prophylaxis may not eliminate the excess of cardiovascular events on

rofecoxib 25 mg compared to naproxen . . .’’ The FDA knew, but the prescribing physicians and the American public remained blissfully unaware—and the band played

on . . .

Merck has repeatedly insisted that prior to the APPROVe study, there was no evidence of Vioxx’s toxicity. In multiple scientific meetings and other communications

with physicians, Merck presented data from Alzheimer’s disease studies to claim

that there was no heart attack risk from Vioxx. However, FDA memos released last

week show that the FDA ‘‘never accepted the results from the Alzheimer’s studies

as a replacement for prospectively designed, placebo-controlled studies. Furthermore, the FDA repeatedly requested that these data be updated.’’ Yet, it took more

than a year from FDA’s first request on December 9, 2002 to when it finally received the updated data on December 17, 2003. As early as 2001, the FDA already

knew that in two Alzheimer’s Disease studies, patients on Vioxx were almost twice

as likely to die as those on placebo; updated safety data confirmed these findings.

Yet, the FDA never released their analysis in any scientific meeting or any other

communication to the public. Once again, the drug company continues to claim safety of its drug, the FDA knows otherwise, but the prescribing physicians and patients

remain blissfully unaware. And the band plays on...

5. THE LABEL PROCESS IS ONE OF NEGOTIATIONS—LET US MAKE A DEAL ...

There needs to be an open public discussion of the role of FDA in approving drugs

and labels. The label is the practically the only way through which the FDA communicates with physicians. Last week, the FDA released a document titled ‘‘Sequence

of Events with Vioxx, since opening of IND’’. I would encourage all of you to read

it—and see for yourself how this process can be manipulated. Some quotes from this

document:

‘‘The sponsor rejected FDA proposed labeling.’’

‘‘The division requested that the sponsors reconsider their proposal . . .’’

‘‘Merck cancelled the January 09, 2002 meeting.’’

And many more.

The current process of labeling is one of negotiations—if the ‘‘sponsor’’ does not

agree with what the FDA wants, it can continue to stall or worse. In the meantime,

it can continue to sell its drug and promote its cardiovascular safety in the scientific

and lay media. And the band plays on.

Finally, one side gives in—the label is approved. A label that mostly supports

Merck’s position.

This process needs to be corrected, if need be, by new legislation. The FDA should

be given the authority that is accorded to our judicial system—to make unilateral

decisions on issues of public health safety, after appropriate public hearings, without having to negotiate and reach agreement with drug companies. The FDA should

regulate the drug companies, not collaborate or negotiate with them if there is any

question of public safety.

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6. ABSENCE OF PUBLICLY-AVAILABLE INFORMATION

The FDA approval process needs to be more open and subject to public scrutiny.

Once a drug is approved, all the data supporting such approval should be put in

the public domain. If this had been done with Vioxx, perhaps independent scientists

would have been able to spot early signals. Similarly, all clinical study data submitted to the FDA should be available to the public after the drug is approved.

Claims of ‘‘trade secrets’’ should not take precedence over public health and safety.

Pharmaceutical companies should not be allowed to selectively disseminate only

positive data.

The FDA should encourage its scientists to publish their findings—even if these

findings challenge currently-held opinions. In fact, it is more important to hear

views of dissent—only through an open discussion of all issues does science advance.

Scientists like Dr. Graham and Dr. Mossholder should be encouraged to discuss

their findings in public, and publish in the scientific literature.

7. EMPHASIS ON DRUG SAFETY

It is important for life-saving medications to be approved in a rapid fashion. However, there needs to be a renewed focus on drug safety as well. Current standards

regard every drug as safe—even one that has multiple safety signals in clinical

trials—unless it can be proven with 95% certainty that it is not. Such certainty requires large trials, which are not done—and the band plays on—If there is conditional approval, this will change.

An independent office of drug safety which does not report to the FDA new drug

approval section should be established. Safety data on all new drug approvals must

be vetted through this office. Such independent office should have the authority to

conduct safety studies on approved drugs, or require that such studies be conducted

if there are safety signals. Only then will be able to adhere to the principle of

‘‘Primum, Non Nocere’’—First, Do No Harm.

Thank you.

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Med 1998; 105(1B):31-38.

2. Singh G and Triadafilopoulos G. Epidemiology of NSAID-induced GI complications. J

Rheumatol 1999; 26 Suppl 26:18-24.

3. Singh G, Mithal A, Triadafilopoulos G. Decreasing hospitalizations due to complicated gastric and duodenal ulcers in the United States: 1998-2001. Gastroenterology 2004; 126 (4 Suppl.

2): A97-98.

4. Ray WA, Stein CM, Hall K, Daugherty JR, Griffin MR. Non-steroidal anti-inflammatory

drugs and risk of serious coronary heart disease: an observational cohort study. Lancet

2002;359:118-123.

5. Muliner T. Anticipated consequences of NSAID antiplatelet effects on cardiovascular events

and effects of excluding low-dose aspirin use in the Cox-2 GI Outcomes Megatrial. Letter of November 21, 1996 to B Friedman, A Nies, and R Spector.

6. Villalba ML. FDA Medical Officer Review of VIOXX (rofecoxib), NDA 21-042 (capsules) and

NDA 21-052 (oral solution). Http://www.fda.gov/ cder/drug/infopage/vioxx/default.htm.

7. Targum SL. Consultation on NDA 21-042, S-007; Review of cardiovascular safety database

[on Vioxx or rofecoxib). FDA Memorandum, Feb 1, 2001. Http://www.fda.gov/ohrms/dockets/ac/

01/briefing/3677b2—06—cardio.doc; last accessed on June 5, 2001.

Mr. DEAL. Dr. Singh, I am going to have to stop you at this point

since we have exceeded the 5 minutes, but we will, I am sure, expound on this as we get to the question stage. Thank you very

much.

Mr. SINGH. Thank you.

Mr. DEAL. And our next witness is Mr. Richard Kingham from

here in Washington, DC of Covington & Burling. We are pleased

to have you, Mr. Kingham.

STATEMENT OF RICHARD F. KINGHAM

Mr. KINGHAM. Thank you, Mr. Chairman.

I was asked to address the specific provision relating to punitive

damages for products that are approved by FDA, particularly

drugs, and that is what I will do.

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I have looked at the language that was in H.R. 5, though I recognize, of course, that there is no specific language before us today

in this hearing.

I note the following things. First, it is a very limited defense. It

applies only to punitive damages. It does not, in its terms, limit the

ability of a plaintiff to recover for economic damages, including

pain and suffering. Now there are other issues in the bill, but this

provision does not affect that. So it affects only punitive damages.

What is more, it applies only if the product went through an

FDA approval system and if the FDA actually looked at the aspect

of the product that is the subject of the litigation and made it affirmative decision with respect to it. And it does not apply if the

manufacturer withheld anything from the FDA during the approval

process or afterwards, nor does it apply if anything improper was

done in the way of payments to FDA officials.

So it is a narrow and limited provision. It is not unprecedented.

Not only have eight States passed legislation like this over the last

20 years, but Congress passed a provision very similar to this in

1986, which I was involved in negotiating, the National Childhood

Vaccine Injury Act of 1986, which includes a provision that significantly limits the right to get punitive damages for products that

are approved by FDA and are within the scope of that legislation.

So we have ample precedent for this having been done.

Now what is its rationale? The rationale ultimately is that if you

have given all of the information to FDA that it needs to make benefit risk judgments about a product and if the FDA has made that

judgment, then you can not be held liable for having engaged in

the kind of egregious misconduct that warrants punitive damages.

This does not mean that courts and juries can not second-guess, in

the context of compensatory damages, whether the right decisions

were made by manufacturers. They can, indeed.

Now the fact is, all drugs, that I am familiar with, entail risks,

and the approval of every drug is a benefit risk judgment. FDA officials, in my experience, and it is 31 years of experience, make a

good faith effort to perform that function. Yes, they make decisions

that well-intentioned people disagree with. They may even sometimes make mistakes. I do not believe there is any evidence that

FDA officials engage in the kind of egregious misconduct that

would warrant the imposition of punitive damages for the decisions

they make and which manufacturers comply with.

Let me switch now and just respond to a couple of things that

have been said.

Professor Rosenbaum suggests in her written testimony, and she

suggested in her oral testimony, that there may be some constitutional problem with this proposed legislation. Well, let me say,

first, there has never been a serious constitutional issue about a

very similar provision included in the childhood vaccine legislation

in 1986. That problem has never occurred.

Second, a much stronger limitation on liability with respect to

drug products, vaccines, was enacted by Congress 10 years before

that in the swine flu episode and that actually was tested in the

courts and was determined not to violate the constitution. I don’t

think there is a serious constitutional argument here.

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I also don’t think this legislation protects against a situation in

which someone deliberately introduces poison, or otherwise

tampers, with a product. In fact, it has provisions that expressly

require compliance with tamper-evident packaging regulations as a

condition of protection against punitive damages.

Dr. Singh has made a number of points, and I won’t deal with

all of them, but I would say two things to respond to him.

First of all, the FDA does have the power to require manufacturers to engage in post-marketing inquiries. There were regulations

passed in the 1970’s that give the agency that authority, if it wishes to use it. The agency does communicate with doctors. It does

publish, in medical journals and other places, information concerning its findings from post-marketing safety evaluation and

other activities that the agency engages in. The agency does communicate with the profession in other ways than through the drug

approval process.

There are, clearly, things that can be improved about FDA, about

the pharmaceutical industry. There are always areas of improvement that can be identified. I simply do not see, in what has been

presented here today, evidence of the kind of misbehavior on the

FDA’s part that would justify the imposition of punitive damages

on people who comply with its requirements and fully disclose the

information they have that is relevant to the imposition of those requirements.

Thank you.

[The prepared statement of Richard F. Kingham follows:]

PREPARED STATEMENT OF RICHARD F. KINGHAM, PARTNER, COVINGTON & BURLING

Mr. Chairman, thank you for inviting me to testify before this Subcommittee. My

name is Richard F. Kingham. I am a partner in the law firm of Covington & Burling, where I have practiced in the area of food and drug law for more than 31 years.

During this time, I have represented pharmaceutical companies and industry associations in numerous proceedings before the Food and Drug Administration and

other federal agencies. I have also advised clients with respect to product liability

actions and the relationship between tort liability and the FDA drug approval process. I have served on committees of the National Institutes of Health and the Institute of Medicine of the National Academy of Sciences and have taught food and drug

law and related subjects at the University of Virginia School of Law, the Georgetown University Law Center, and the University of Wales in the UK. I am testifying

in my personal capacity at the request of the Committee, and am not representing

any client.

My statement addresses the proposal to provide a defense to punitive damages for

manufacturers and distributors of drugs, biological products, and medical devices

that have been subject to premarket approval, licensure, or clearance by FDA. Language to enact this type of protection included in section 7(c) of H.R.5 as passed by

the House in the 108th Congress. I support the passage of legislation creating a

carefully worded, narrow defense that is based on the language in that bill.

A defense like that proposed in H.R.5 will protect against the imposition of punitive damage judgments against manufacturers, but only under very limited circumstances. The defense will not prevent any person from bringing a claim against

a drug or device manufacturer. Injured patients will continue to be able to have

their day in state court. Furthermore, the defense is narrowly crafted so that it will

not prevent an injured patient from being awarded full compensation in any case.

The full range of compensatory damages, including substantial awards for pain and

suffering, will still be available to plaintiffs. The bill will provide only a narrow defense to the award of punitive damages.

Moreover, only defendants that have complied in all relevant respects with FDA

requirements are eligible to use this defense. FDA not only conducts a demanding

and comprehensive safety assessment before each product reaches the market, but

also continues to review the product’s safety over its life on the market. Although

the need for certain changes and reforms in FDA’s review process recently has been

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the subject of debate, the agency’s current structure and processes do support the

goal of providing a comprehensive review. To facilitate this review, FDA imposes extensive reporting requirements on the manufacturers of drugs, biological products,

and medical devices. Any manufacturer that knowingly misrepresents or withholds

required information from FDA, and thus potentially distorts or subverts the FDA

review process, will be unable to use this statutory defense against punitive damages.

A review of even a few steps of the FDA review process for prescription pharmaceutical products reveals both the scope of the information that manufacturers must

submit to FDA and to the breadth and depth of FDA’s product review. I choose to

focus on prescription drugs today because these products have been the topic of

much discussion in recent months. The requirements for medical devices and biological products, including vaccines, are similar in breadth.

In applying for FDA approval of a new prescription drug, the manufacturer is required to submit to FDA all known safety information about the drug, including information obtained in clinical trials in the U.S. and in foreign countries. As part of

this application, the manufacturer must submit the results of affirmative large-scale

studies of the drug’s safety and effectiveness. These studies often involve several

thousand patients at multiple locations. New Drug Applications (NDAs) literally can

reach hundreds of thousands of pages in length.

As part of a drug’s approval, FDA may require the manufacturer to conduct additional studies and submit reports. These postmarketing studies provide additional

data and may allow the manufacturer and the agency to identify rarely-occurring

adverse events that could not have been identified in clinical trials of even thousands of patients.

Whether or not postmarketing studies are required, the drug manufacturer must

report to the agency a wide range of information about each marketed drug on an

ongoing basis. For instance, the manufacturer must report to FDA adverse events

that occur anywhere in the world, whether or not the company thinks that the event

is caused by the drug. Any issues arising in the manufacturing process must be reported, as well. For instance, if even one batch of a distributed drug fails to meet

a single manufacturing specification, FDA must be notified within 3 days. In annual

reports to FDA, the manufacturer must submit the reports of any clinical trial conducted inside or outside of the U.S. The manufacturer also must notify FDA of any

significant regulatory decision that affects the drug by any regulatory agency in the

world.

FDA’s structure and processes allow the agency to review this information thoroughly and to update potential safety concerns continuously. In its reviewing Divisions, FDA employs hundreds of doctors, each qualified in the relevant scientific discipline. These doctors review individual data points for each drug, as well as the

universe of data for similar products, to determine whether the product’s benefitrisk ratio has changed and if additional product warnings or limitations are required. To assist in this assessment, FDA employs epidemiologists, statisticians, and

microbiologists and has developed technology tailored to the reviewers’ needs such

as adverse event databases. Moreover, the agency’s advisory committees, of which

there is one for each category of drug, are composed of prominent specialists that

are not employed by FDA and are required to comply with FDA requirements regarding conflicts of interest. FDA regularly refers technical issues to these committees for additional input.

The combination of mandatory reporting by manufacturers and careful agency review allows FDA to identify immediate and unusual safety issues such as manufacturing errors, as well as long-term issues such as rarely-occurring but serious adverse events. The manufacturers clearly play an essential and irreplaceable role in

the process.

Manufacturers that act lawfully and in good faith with FDA’s requirements—that

submit all required information to FDA and that comply with any limitations that

FDA imposes on the product’s marketing—still may be exposed to tort claims of negligence and strict liability under the proposed statutory language. They still may be

required to pay compensatory damages. This bill properly would recognize, however,

that these manufacturers cannot be deemed to have engaged in the sort of egregious

misconduct that would justify punitive damages. Their good faith compliance with

the regulatory requirements cannot be viewed as the kind of behavior that would

‘‘shock the conscience’’ of the community and thus deserve to be subject to punitive

damages.

Indeed, commentators have urged for years that regulatory compliance be deemed

a defense to claims for punitive damages. In 1991, a very distinguished panel writing the Reporter’s Study on Enterprise Responsibility for Personal Injury for the

American Law Institute asserted that, ‘‘If a defendant has fully complied with reguVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00133 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
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latory requirements and fully disclosed all material information relating to risk and

its control, it is hard to justify the jury’s freedom to award punitive damages.’’ The

panel argued specifically that ‘‘Pharmaceuticals present a special combination of circumstances justifying such a [limited] defense.’’

Congress itself took that view in passing the 1986 National Childhood Vaccine Injury Act. That Act creates a limited defense to punitive damages for manufacturers

of certain vaccines. That provision’s limitations are similar to those in the proposed

language, in that vaccine manufacturers may invoke the defense only if they can

demonstrate their compliance in all material respects with the relevant requirements of the Federal Food, Drug, and Cosmetic Act (FDCA). That legislation has

successfully achieved the goals that led to its enactment. Companies developing or

testing vaccines for many new uses are not covered by that Act, however.

A large number of states also have taken the view that manufacturers should be

able to defend themselves from punitive damages on the basis of their compliance

with FDA requirements. Since New Jersey first enacted such a defense nearly 20

years ago, at least seven additional states have created a statutory defense either

for FDA-approved products or for all products that comply with mandatory state or

Federal government standards. In addition, six other states either prohibit claims

for punitive damages more generally or make no provision for the award of punitive

damages. Michigan goes even further, providing a complete defense to tort liability

for products that are FDA-approved and compliant.

Thus, at least 15 states provide defenses that are at least as generous as the language of the proposed bill. There has been no suggestion that these state laws have

precluded injured patients from successfully litigating cases of negligence and strict

liability against companies manufacturing and distributing drugs, biologics, and

medical devices. In fact, the legal scholars that endorse a limited regulatory compliance defense acknowledge that the defense will affect a relatively limited number

of cases.

The language of H.R.5 also appropriately makes the defense unavailable where

a person illegally paid or bribed an FDA official to obtain or maintain the approval,

clearance, or licensure for the product at issue. Although no innovative pharmaceutical manufacturer has been accused of bribery, and although the concerns regarding generic manufacturers appear to have been resolved, this language remains

a necessary and wise precaution.

In summary, this House should enact a carefully crafted, limited defense to punitive damages for products that are subject to and compliant with FDA premarket

approval requirements. Under such a provision, no injured person will go uncompensated. No person will receive less than complete compensation. At the same time,

the defense will encourage reporting by FDA-regulated companies and will further

strengthen the already comprehensive FDA review process for drugs, biological

products, and medical devices.

Mr. DEAL. Thank you, sir.

Our next witness is Dr. Sidney Wolfe, Director of the Health Research Group at Public Citizen.

Dr. Wolfe.

STATEMENT OF SIDNEY M. WOLFE

Mr. WOLFE. Thank you.

In keeping in this whole idea of a medical defense and if something is approved by the FDA it must be okay is the idea that the

FDA is doing a good job. We surveyed physicians in the FDA in

1998 because a number of drugs that shouldn’t have come on the

market were coming on, and then they were being taken off. And

they told us that there were 27 drugs, which they had thought

were too dangerous, which were approved over their head. Seventeen of them told us that the standards for safety and efficacy

had—were lower than they had been prior to 1995, and several

said they had been silenced against talking about drug dangers at

Advisory Committee hearings.

The FDA itself followed up our study several years later, and

they found that a third of the medical officers didn’t feel comfortable expressing different scientific opinions, and a number of

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reviewers said decisions should be based more on science and less

on corporate wishes.

And then finally, just a year and a half ago, the Inspector General of HHS did another study on the same topic and found that

18 percent of the physicians in the FDA felt pressure to recommend

that drugs be approved for sale, despite their reservations. The

conclusion of the inspector general is overall, these findings represent a significant safety warning.

I am now going to quickly go through seven examples of drugs:

two have been taken off of the market much too late, five are still

on the market. The five that are still on, we have filed petitions

with the FDA with all of them to be banned.

Rezulin, a diabetes drug, approved in March 1997, and within a

few months, it was taken off the market in the United Kingdom

because of liver damage largely in the United States. Six deaths

from liver damage. We petitioned the FDA to ban this drug. A few

months later, by then, 26 liver deaths. The FDA held an Advisory

Committee meeting. Another couple of years later, 43 liver deaths.

And finally, after FDA physicians complained not for attribution

that the drug should be taken off the market, it was taken off the

market several years later than it had been in the United Kingdom. By then, 63 liver deaths, 7 transplants.

Trovan, an antibiotic, was taken off the market everywhere in

the world because of liver damage. Liver damage had shown up before it was approved in the United States in 10 percent of men who

were tested with this Pfizer drug. When the FDA finally decided

what to do, instead of banning the drug, as the rest of the world

had done, they banned it except for people in nursing homes and

in hospitals. When we filed the petition in 1999 to ban the drug,

there were eight cases of liver failure, including five deaths and

three transplants. This morning, we looked at the most recent

data: 56 cases of liver failure, including 29 deaths and 9 transplants. This drug is still in the market, only in the United States

because of the FDA’s incompetence, I think.

Baycol, a cholesterol-lowering drug, was taken off the market a

year after the FDA had enough information to be aware that it was

much more dangerous than the other cholesterol-lowering drugs.

By the time it was taken off the market, there were 1,899 cases

of this life-threatening muscle destruction, called rhabdomyolysis.

Many of these had occurred in the year between when the FDA

knew and when the FDA acted.

A somewhat chemically related cousin to Baycol is a drug we

tried to stop from getting on the market in the United States called

Crestor, another cholesterol-lowering drug. Before approval, it

looked like it had more cases of this same rhabdomyolysis than any

drug ever, even Baycol, which came off the market, hadn’t shown

any of these cases prior to its approval. An FDA medical officer

looking at some kidney damage said, ‘‘This may represent an unacceptable risk since the other cholesterol-lowering drugs don’t have

these effects.’’ We tried to stop it, but since it came into the market, there have been 100 cases of this life-threatening

rhabdomyolysis muscle destruction and more than 40 cases of renal

failure, a rate 75 times higher per million prescriptions than the

other statins combined.

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Vioxx has been mentioned before. Four years before it came off

the market, a published study showed a four to fivefold increased

risk in heart attacks. We asked the FDA to put a black box warning on it. Had that been done, hundreds of thousands of people—

millions of people who took the drug wouldn’t have taken it, and

according to FDA’s own estimates, tens of thousands of heart attacks would have been prevented, including Mr. Huggins’ wife we

heard about before.

Bextra, another drug in this family, still on the market. We had

to sue the FDA, because Pfizer and the FDA didn’t want us to see

the internal reviews on this drug, which showed an FDA physician

concerned about the blood clotting properties of this drug and the

similarity between it and Vioxx.

And finally, Meridia, sibutramine, a weight-reduction drug. The

FDA physician and the Advisory Committee thought it was too

dangerous. It shouldn’t have been approved. It came on the market.

At this point, 56 cardiovascular deaths in people using the drug,

many under the age of 50.

Not counting Vioxx or Baycol, we are talking about hundreds, if

not thousands, of people who have died unnecessarily because of

drugs the FDA should have taken off the market. We have a book

called ‘‘Worst Pills, Best Pills,’’ which lists 170 other drugs that we

say do not use, also on our website, worstpills.org. The FDA clearly

is not doing a good job, and it is adding insult to injury to try and

immunize drug companies because they pass the so-called FDA

gold standard.

[The prepared statement of Sidney M. Wolfe follows:]

PREPARED STATEMENT OF SIDNEY M. WOLFE, DIRECTOR, PUBLIC CITIZEN’S HEALTH

RESEARCH GROUP

Chairman Deal and Members of the Subcommittee, thank you for the opportunity

to testify today. Under the most perfect circumstances, if the FDA were actually

doing as good a job as possible at preventing the approval of drugs and other medical products whose benefits are known to be outweighed by their risks and, as expeditiously as possible, removing such products when such risks are discovered after

approval, this legislation would still unfairly punish patients and their families.

I will focus on substantial evidence, based on our more than 33 years of oversight

over the agency, demonstrating that the FDA is far from doing an adequate job protecting the public from such products, making the impact of this legislation even

more disastrous to potential victims.

HRG MEDICAL OFFICER SURVEY/FDA STUDY/INSPECTOR GENERAL STUDY

In late 1998, prompted by many drugs with clear evidence of dangers not being

adequately regulated, we surveyed FDA medical officers who were the primary reviewers in the Center for Drug Evaluation and Research (CDER) for new drug applications. The responses, from 53 FDA physicians, included 27 instances cited in

which the FDA medical officer thought a drug too dangerous to be approved but approval occurred over their objection. Seventeen medical officers described the current standards of FDA review for safety and efficacy as ‘‘lower’’ or ‘‘much lower’’

compared to those in existence prior to 1995. And several medical officers said they

had been instructed by their superiors to censor their reports or presentations.

A study in 2001 by the FDA itself, precipitated by high turnover rates among scientists and physicians in the agency, showed that about one-third of medical officers

did not feel comfortable expressing differing scientific opinions, and a similar number felt that decisions adverse to a drug were stigmatized within the agency. A number of reviewers said that decisions should be based more on science and less on

corporate wishes.

A subsequent study by the HHS Inspector General in 2003 confirmed that decisions concerning drug safety and effectiveness were being overturned. Eighteen percent of surveyed FDA physicians and scientists felt pressure to recommend that

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drugs be approved for sale despite their reservations about the drug’s safety, efficacy or quality. The report concluded: ‘‘Overall, these findings present a significant

warning signal.’’

SPECIFIC EXAMPLES OF DANGEROUSLY POOR FDA REGULATION

Rezulin (troglitazone-diabetes drug)

• March, 1997: U.S. Rezulin marketing begins • Dec, 1997: drug withdrawn in UK after 130 cases of liver damage including six

deaths, mainly in the US • July, 1998: Health Research Group petitions FDA to ban Rezulin after 560 cases

of liver damage, including 26 liver deaths • March, 1999: FDA advisory committee meeting: now 43 liver deaths

• early, 2000: Some FDA physicians state drug should be banned

• March, 2000: Rezulin is withdrawn in the US; by then, 63 liver deaths, seven liver

transplants

Trovan (trovafloxacin-antibiotic) Like two other drugs also approved in 1997,

the painkiller Duract (bromfenac) and the diabetes drug Rezulin (troglitazone), (now

both off the market) there was also clear evidence of liver damage caused by Trovan

(in animals and in humans) before the drug was approved in December 1997. In one

study prior to approval in which the drug was used to treat prostatitis, almost 10%

of the men (14 out of 140) given the drug developed evidence of liver toxicity. With

eight other drugs in the fluoroquinolone antibiotic family available in the U.S, as

well as dozens of other safer and equally or more effective drugs for infections, the

removal of Trovan from the market would not have deprived doctors or patients of

a drug that could possibly be considered indispensable. Instead of banning Trovan

as was done everywhere else in the world, the FDA chose to ‘‘limit’’ its use in the

United States to patients who were either hospitalized or in nursing homes. At the

time of our petition in 1999 to ban the drug, there were eight cases of liver failure,

including five deaths and three liver transplants. There are now a total of 56 cases

of liver failure, including 29 deaths and nine people requiring liver transplants.

Baycol (cerivastatin-cholesterol lowering) Approximately one year before

Baycol was removed from the market in August 2001, its manufacturer Bayer, using

FDA data on other statins found that Baycol had 20 times more reports of

rhabdomyolysis (an often-fatal destruction of muscle) per million prescriptions than

Lipitor. An FDA official, feebly excusing FDA’s belated ban, stated that ‘‘We weren’t

aware at that point of the difference between Baycol, and the other similar [drugs].

Our expectation is when a company becomes aware of a specific problem with their

drug, they come to us.’’ By the time Baycol was banned, there were 1,899 cases of

rhabdomyolysis, a significant number having occurred between the time there was

unequivocal evidence that FDA should have banned the drug and when it was actually banned a year later.

Crestor (rosuvastatin-cholesterol lowering) Despite the Baycol disaster, and

some chemical similarity between Baycol and Crestor, the FDA approved Crestor in

August 2003, knowing that prior to approval there had already been 7 cases of

rhabdomyolysis in clinical trials, compared to none in clinical trials prior to Baycol’s

approval (or that of any other statin). In addition to this risk, which AstraZeneca

(Crestor’s manufacturer) and the FDA wrote off as limited to the highest (80 mg)

dose that was subsequently not approved, the drug also causes unique kidney toxicity, even in people who did not have rhabdomyolysis that can lead to secondary

kidney damage. An FDA medical officer reviewing dozens of cases of blood and protein in the urine and several cases of renal insufficiency/renal failure in people

using Crestor before approval said ‘‘if they [these findings] are the signals for the

potential progression to renal failure in a small number of patients, this may represent an unacceptable risk since currently approved statins do not have similar

renal effects.’’ Since Crestor came on the market, there have been more than 100

cases of rhabdomyolysis reported to the FDA, a rate per million prescriptions that

is higher than any of the other statins still on the market. In addition, there have

been approximately 40 cases of renal failure in people without rhabdomyolysis, a

rate approximately 75 times higher per million prescriptions than that of the other

statins combined.

Vioxx (rofecoxib-NSAID) A study published more than four years ago showed

a four to five-fold increase in heart attacks in people using Vioxx compared to those

using naproxen. As a result, we asked FDA for a black box warning four years ago.

Although such a warning would have greatly reduced the toll of tens of thousands

of heart attacks occurring between then and Vioxx’s withdrawal, the agency, to the

pleasure of Merck, rejected a black box and chose not to adequately warn the public.

Many lives were thus lost.

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Bextra (valdecoxib-NSAID) When we learned almost two years ago that FDA

had rejected Pfizer’s application for a new pain indication for Bextra, the agency,

in collaboration with Pfizer, denied our freedom of information request for the FDA

review as to why the application had been rejected. We thus had to sue the FDA

to obtain these data. The medical officer who reviewed the study stated that ‘‘The

excess of serious cardiovascular thromboembolic [blood clots] in the valdecoxib arm

of the CABG [Coronary Artery Bypass Graft] trial is of note as the entire study population received prophylactic low dose aspirin as part of the standard of care in this

setting to minimize just such events. Given the emerging concern over a possible

pro-thrombotic action of certain agents in the COX2 class, these data are of concern.’’

Meridia (sibutramine-weight reduction) Both the FDA medical officer who reviewed the new drug application for the amphetamine-like weight reduction drug

Meridia and the FDA advisory committee were opposed to the drug’s approval because of safety concerns such as increased blood pressure. Since approval, there

have been reports of a total of 56 cardiovascular deaths in people using Meridia,

a large proportion of whom were under the age of 50.

If this legislation is enacted, it will represent the third prong of a three-pronged

attack on patients’ safety involving the FDA and the drug and device industries:

The two prongs involving the FDA are, as discussed in the above examples, inadequate regulation over the introduction and market removal of unsafe drugs and a

sharp (85%) decrease from 1998 through 2004 in FDA enforcement actions concerning illegal prescription drug ads—distorting the power of information into misleading doctors and patients about risks and benefits of drugs. The third prong, reducing the ‘‘regulation’’ of drug and device companies by lessening their liability for

injuries and deaths to patients, is all the more onerous in the face of such lax FDA

activities. Unless all three forms of ‘‘regulation’’ are allowed to operate in a maximal

way, patients will not be adequately protected.

In addition to the four drugs discussed above that are still on the market in this

country, all of which we have petitioned the FDA to ban, the newly published edition of our book, Worst Pills, Best Pills and our web site, WorstPills.org both list

176 other prescription drugs that we and our consultants urge that people DO NOT

USE and discuss safer alternatives to each of these.

Comments Regarding Draconian Limits the House Proposes to Placed on

Patients’ Medical Malpractice and Products Liability Lawsuits

Ensuring safe drugs for Americas’ consumers is not just predicated on a strong

regulatory system at the FDA. The role of the civil justice system is equally important. Without strong state laws that enable patients and consumers to hold medical

providers accountable for negligence or errors, the medical industry—including the

drug companies—will have much more incentive to cut corners in pursuit of profits

and will have much less incentive to be vigilant about patient safety.

For this reason, Public Citizen strongly objected to the two identical omnibus

medical malpractice bills voted approved by the House last Congress (H.R. 5 and

H.R. 4280). As it is likely that the same legislation will soon be before this committee and the entire House, I would like to provide our perspective on how inadvisable it is.

This legislation is remarkable in that its provisions not only apply to medical malpractice lawsuits against doctors, hospitals and HMOs, but also to pharmaceutical

companies and medical device companies when their products injure or kill. In this

way, the legislation is also a product liability bill.

The cumulative effect of the provisions would be to limit the ability of patients

to recover for serious injuries and also to limit the ability of patients to find lawyers

willing to take their cases. As a result, drug and device companies would have less

incentive to ensure that their products are as safe as possible and that adverse effects are known before the products are marketed—a consequence that will threaten

the health and well-being of us all.

The two bills introduced in the last Congress proposed to cap non-economic damages at $250,000. Non-economic damages compensate people for pain and suffering—sometimes a lifetime’s worth—resulting from permanent and significant injury such as brain damage, paralysis, disfigurement, or lost childbearing ability. For

example, this cap would affect patients with significant kidney damage from a drug

such as Rezulin, permanent incapacitating back injury caused by a broken spinal

screw, or children who lost their young father from a heart attack induced by a CoX2 pain reliever. Cases seeking compensation for such injuries are not ‘‘frivolous’’

cases—the usual justification offered by President Bush and others for imposing a

damages cap. And a $250,000 cap will have it s biggest impact on the cases that

are the most deserving of large compensation—something the legislation’s proVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00138 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
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ponents claim they do not intend. Moreover, because the bill would not allow the

damages to account for inflation, its arbitrary limits would become more unjust with

each day.

In addition, the two bills introduced in the last Congress would have virtually

eliminated the ability of injured patients to recover punitive damages. Punitive

damages are awarded to punish and deter serious and wanton wrongdoing. Although they are awarded in only a small fraction of civil cases, the threat of punitive damages is important to deter reckless disregard for patient safety. Last year’s

legislation would have eliminated punitive damages entirely in cases against drug

and medical device companies or restricted them to instances in which the plaintiff

could show that the company had marketed the product without FDA approval or

that it had committed fraud to get FDA approval. Because prescription drugs and

medical devices cannot be sold legally without FDA approval, this latter proposal

effectively bans punitives.

Litigation against Merck is still in its early stages, but it may unearth very incriminating documents showing that the company knew Vioxx posed a serious danger to a significant number of patients, that the company knew that Vioxx had limited, if any, improved efficacy over ibuprofen, but that, to protect the company’s investment, the company engaged in a cover-up of information that would have saved

lives. If what I have posited about Merck is true, would the American public support

sparing a company that engages in such unethical conduct from punitive damages?

I can’t imagine it.

The proposal to apply a one-year statute of limitations, running from discovery

of the injury, will provide another hurdle to the ability of injured consumers to bring

suit. The law in most states starts the limitation period running from the discovery

of the malpractice, not discovery of the injury. This distinction is important because

an injury will frequently manifest itself well before its cause is known. For example,

the association between the anti-depressant Serzone and liver toxicity was not widely known until 2002, years after the drug came on the market in 1995. The injured

party should not have to twice bear the cost of this defective product.

The two medical malpractice bills also would have changed state rules of joint and

several liability, leaving patients with no recovery for the share of damages assigned

to an uninsured, underinsured, or bankrupt defendant. The doctrine of joint and

several liability says that when two defendants, such as a doctor and a hospital, are

both found liable for negligence, a plaintiff may collect the entire award from either

defendant if the other is unable to pay its share. In essence, the legal system recognizes that the wrongdoing could not have occurred without the participation of all

parties and, therefore, that all parties should be accountable for making the victim

whole.

Next, by instituting a ‘‘periodic payment rule’’ for future damages over $100,000,

the legislation would allow defendants and insurance companies to string out payments for future damages over the life expectancy of the victim, rather than having

to pay up front. Thus, even after the civil justice system has determined that the

money rightfully belongs to the plaintiff, defendants and insurers would be able to

invest and earn interest on a large piece of the plaintiff’s damages award. Victims

would be left to cope with new and unexpected expenses attributable to their injury,

such as changing medical costs or increased transportation costs. The bill would provide no protection to the victim if his or her needs change or if the defendant drug

manufacturer’s insurance company becomes insolvent.

Finally, the cap on plaintiffs’ attorney fees payable under contingent fee arrangements will drastically cut back on the ability of patients with limited means to get

qualified legal counsel. As a result, patients’ ability to bring product liability cases

against drug and device companies, which have massive resources to defend themselves, will be reduced significantly.

Medical malpractice and product liability cases are very risky for plaintiffs’ attorneys for three reasons: the costs are especially high, the likelihood of prevailing is

quite low compared with other types of tort actions, and the lawyers do not get paid

unless they win. But limiting plaintiffs’ attorney fees will create an enormous imbalance in favor of the defendant. While we may disagree on the need for damage caps,

we should all be able to agree that our legal system should remain a fair and balanced forum accessible to all Americans.

Mr. DEAL. Thank you.

Our last witness is Victor Schwartz of Shook, Hardy & Bacon

here in Washington, DC.

Mr. Schwartz, we are pleased to have you.

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STATEMENT OF VICTOR E. SCHWARTZ

Mr. SCHWARTZ. Okay. Thank you.

I think I am the last of 15 witnesses here that as a prominent

politician who had married a woman who was her sixth husband,

and I once heard him say he knew what the challenge was, he just

had to find a way to make an interest——

Mr. DEAL. I haven’t started the clock yet, sir.

Mr. SCHWARTZ. I know. They always let me—you have one line

that is not on the clock.

Mr. Chairman, thank you for inviting me and Ms. DeGette, is

that how you pronounce it, actually, I was in—down in Illinois in

that hellhole of Madison County, and they had a woman doctor, an

ob-gyn, who was moving to Colorado because her insurance would

be reduced by 80 percent. And it is just something to think about.

I think that doctors should actually practice where they are needed

and not be hopscotching around the country to find better tort

laws.

But I am going to briefly talk about punitive damages and this

somewhat controversial provision in your bill.

Punitive damages, plain and simple, are there to punish people

who have done something wrong. And anybody, and I have won punitive damage cases, the first one in Ohio, actually. And I had the

State in back of me to enforce that judgment. And there is really

very little difference between a punitive damage award, which is

strictly punishment, and the State going after somebody and punishing them for something wrong that they have done.

And in Texas, when I was down there, the Texas trial lawyers

had signs up all over the place. And I like those signs. They said,

‘‘Punitive damages are needed to punish corporate criminals.’’ Well,

if somebody has followed the law, they are not a criminal. This

body, a few years ago, passed legislation that raised the speed

limit. My friend Ralph Nato was aghast. He thought it was a very

bad thing. If a person today drives at 65 miles an hour, a clear day,

they are driving carefully, and they have an accident, and an expert comes in, and this can happen, and that expert testifies, ‘‘Well,

if he had driven 55, there wouldn’t have been an accident.’’ Should

that person be punished?

FDA, we hear it today, and we are going to hear it again and

again, is in controversy. And whether their rules are right or their

rules are wrong, that is something for this body to decide. But if

somebody is following the law, the exact letter of the law, it is very

difficult to see, under our system of justice, why that person should

be punished.

Now that is the FDA defense, properly construed. And there is

something else that hasn’t been mentioned by any other witness.

First, in Ohio, when this bill was—the same provision was put into

law in 1988, I was there. And I was told by opponents that Ohio

would become the dumping ground for bad drugs, that this would

create very bad incentives, it would be Sodom and Gomorra. And

in 2005, the legislation was considered. What happened? None of

that. In fact, it worked very well. There has been no dumping

ground. There have been no problems whatsoever. And we have actual experience with this provision and these horrible tales that are

told have not come true.

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And Mr. Brown, good to see you. I didn’t get a chance to say

hello.

My role as counsel to pharmaceutical companies, and the law is

not just made of carrots and sticks. It has both aspects to it. And

just hitting somebody over the head all of the time doesn’t always

bring about a good result. Mr. Stewart of NYU, the ALI Enterprise

study showed the same thing that is my experience. If you have a

provision in the law that says if you report, you do not have to be

punished, that creates an incentive on that marginal piece to have

the drug company report. And that is one of the benefits of this

type of defense. It has incentives as well as punishments. And they

also know that if they don’t, a jury is told about the defense, and

the jury is told that if you don’t comply with all of the regulations,

there is no shield. And that jury hears in its head that if there is

noncompliance, punishment is appropriate.

So I don’t see the controversy, really, on policy over this type of

defense. There is a controversy about whether the FDA rules

should be changed. But if one follows the law, it is very difficult,

under our system of justice, to justify punishment.

Thank you very much.

[The prepared statement of Victor E. Schwartz follows:]

PREPARED STATEMENT OF VICTOR E. SCHWARTZ, GENERAL COUNSEL, AMERICAN TORT

REFORM ASSOCIATION

Chairman Deal, Ranking Member Brown, and Members of this Distinguished

Subcommittee, I thank you for your kind invitation to testify today about whether

it is appropriate to preclude punitive damages from being awarded against manufacturers of medical products, when the products were subject to pre-market approval

by the Food and Drug Administration (hereinafter ‘‘FDA’’).

BACKGROUND

By way of background, the subject of tort law has been of interest to me throughout my career. I was a law professor and acting dean of the University of Cincinnati

College of Law, and have taught at the University of Virginia, Georgetown, and

American University Law Schools. I continue my affiliation with Cincinnati as an

Adjunct Professor and a Member of the Board of Visitors.

I am co-author of Prosser, Wade & Schwartz’s Torts (10th ed., 2000), the most

widely used torts casebook in the United States. For the first fourteen years of my

practice, I represented only injured persons and assisted in obtaining the first punitive damages verdict in the State of Ohio against a product manufacturer.

I have served under both President Ford and President Carter as Chair of the

Federal Inter-Agency Task Force on Product Liability. That Task Force explored the

product liability crisis that arose in the late 1970s and 1980s. It also developed the

Model Uniform Product Law Act, which has been used as a basis for state legislation and the development of law by courts. I have had the privilege of working with

Members of Congress from both parties on numerous federal liability issues, including the successful enactment of the Biomaterials Assurance Access Act of 1998, the

General Aviation Revitalization Act of 1994, and the Paul D. Coverdell Teacher Protection Act of 2001.

For the past two decades, I have worked at law firms whose principal practice

has been on the defense side. Currently, I chair Shook, Hardy & Bacon’s Public Policy Group. Approximately two hundred articles that I have authored or co-authored

have been published in learned journals. I have been fortunate to have many of

them cited by courts as a basis for rulings of law. I serve, and I am speaking today,

as General Counsel to the American Tort Reform Association (hereinafter ‘‘ATRA’’),

but the views are solely my own, based on my practice and experience. No one,

other than my Public Policy Group colleagues at Shook, Hardy & Bacon, has

changed or modified my testimony.

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HISTORY OF PUNITIVE DAMAGES IN A NUTSHELL

Punitive damages evolved in England in the development of common law. They

served, and continue to serve, an important function. They were an auxiliary to the

criminal law to help assure that persons who committed wrongful criminal acts paid

a price for their conduct, even if the government did not prosecute these acts. The

purposes of punitive damages are to punish the defendant, deter him from committing future wrongful acts and to deter others who might be similarly inclined, so

that such acts are less likely to occur in the future.

It should be absolutely clear to this Subcommittee that punitive damages are not

compensatory. Compensatory damages include paying people for their out-of-pocket

losses in the past and in the future, and also damages for pain and suffering, emotional loss, and other harms that do not readily translate to a precise monetary

value.

Punitive damages are, in effect, punishment by the state. State means are used

to enforce punitive damages, the same way state means are used to enforce the

criminal law or government action and civil fines. As a practical matter, there is

no difference. The state will use its official mechanisms to enforce such awards, and

the sting is the same. Sometimes it is more so, because punitive damages—especially when they are large—generate quite a bit of publicity. Most constitutional

rights that protect criminal defendants, however, do not apply to defendants who

are subject to punitive damages. This is one basic reason why this body should work

to assure that the punitive damages system is fair.

THE CHANGE IN PUNITIVE DAMAGES

During oral argument of a major punitive damage case, Pacific Mut. Life Ins. Co.

v. Haslip, 499 U.S. 1 (1991), Justice Scalia asked a lawyer for a petitioner who was

seeking to overturn a punitive damages award, ‘‘Who whispers in my ear what was

constitutional in 1789 is not constitutional today?’’ I attended that argument and

Justice Scalia, at least in my view, did not receive a clear answer to his question.

Here is the answer.

In 1789, punitive damages were confined solely to purposeful, wrongful acts, such

as battery, assault, and wrongful imprisonment. They also were never larger than

compensatory awards, and usually less. They dealt with a wrongful act and were

imposed once on a defendant. In the past three decades, punitive damages have undergone substantial change in all three of these areas. Punitive damages are not at

all the same as they were in 1789.

First, the standard for awarding punitive damages has been attenuated in a number of states, and mere gross negligence as contrasted with purposeful conduct,

could be a trigger for making an award. Second, the types of acts for which punitive

damages may be imposed have become less clear and harder to define or predict.

Finally, punitive damages awards might be awarded multiple times, especially

against manufacturers where each plaintiff against the company may seek an award

and a jury has absolutely no idea that awards were previously made.

This is by way of background to evaluate whether it is appropriate to allow the

state to punish a defendant—who has marketed a drug or medical device, and has

fully complied with FDA pre-market approval and post-market rules and regulations. Of course, every Member of this Subcommittee knows, and most Americans

know, that the FDA and its procedures have been under question in recent times.

Not long ago, I remember when the FDA was challenged because it was not moving

quickly enough in providing the American public with drugs that were needed to

fight serious diseases. Now, among many, there is a contrary feeling—that the FDA

may be moving too quickly and not carefully enough in the drug approval process.

That debate is an important one to have in Congress, but it is not relevant for a

core public policy decision about whether someone should be punished who has complied with the law.

Let me give you an example. A number of years ago, Congress decided to allow

states to raise the speed limit on automobile driving. My friend, Ralph Nader, and

others, strongly decried the charge, stating that it would lead to more accidents and

more fatalities. Nevertheless, it was the view of Congress that the states should be

permitted to allow drivers to go drive much faster than 55 mph—65, 75 or even 85

mph. Consider a motorist going 65 mph on a clear day that tries to drive carefully

but nevertheless has a collision. The facts indicate that if he had been driving more

slowly, he may have avoided an accident. In our legal system, that drive may be

subject to civil liability. Rational thought clearly suggests, however, that a driver

going at or below the legal speed limit should not be punished by the state. If the

law needs to change, this body or state legislature should do it. Punishment is not

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appropriate for totally lawful acts that have been specifically considered by Congress.

Even prominent members of the personal injury bar agree with this concept. For

example, in a trip to Texas not long ago, I noticed advertisements on the highway,

placed by the Texas Trial Lawyers Association, which is composed of some of the

toughest, most effective personal injury lawyers in America. The advertisement stated, ‘‘Punitive damages are needed to punish corporate criminals.’’ This may be true

because law enforcement mechanisms are sometimes overwhelmed with more serious cases and do not have time to punish wrongful, criminal corporate acts. If a corporation has complied with the law, and a company that manufactures pharmaceuticals or medical devices has met the standards of pre-market approval for the

FDA, it is difficult, as a matter of public policy, to see why they should be punished.

If the FDA standard needs to be changed (just like the situation with the speed

limit, which may need to be changed), it is the responsibility of this body to make

the change. No matter how emotional the arguments might be, it is not sound public

policy to punish a company that has complied with the legal rules.

EXPERIENCE WITH FDA COMPLIANCE PUNITIVE DAMAGES DEFENSE

Compliance with FDA standards defenses have been enacted in a number of

states, including Arizona, Michigan, New Jersey, Oregon, Utah and Ohio (copies of

laws attached hereto). The Michigan law goes further than the bill you are considering—it provides that a product is not defective or unreasonably dangerous, and

the manufacturer or seller is therefore not liable in a product liability action, if the

product at issue was approved by the FDA for safety and efficacy.

I was personally involved in the development of the law in Ohio, which was enacted in 1987. Those who opposed it predicted that the drug companies might treat

Ohio as part of Sodom and Gomorra and dump dangerous drugs in the state. They

said drug warnings might disappear, and defective drugs would be heaped upon the

good citizens of Ohio. As a member of the Ohio Bar, former dean and currently an

Adjunct Professor at Cincinnati, I certainly did not wish to be part of such mayhem,

but I believed, for the policy reasons I have outlined today, that punishment should

not be imposed against people who follow the law. The FDA compliance punitive

damages defense would be sound policy and do no harm. Well, that provision has

now been law for more than 15 years. Recently, the issue was reviewed again by

the Ohio legislature, and the legislation kept that law in place there has been not

a scintilla of evidence that any wrongful conduct was caused by this defense. In fact,

in December 2004, the Ohio legislature amended the law to extend the FDA compliance punitive damages defense to over-the-counter drugs and medical devices, in addition to prescription drugs.

Pharmaceutical companies in Ohio and a number of other states have been treated with fairness in not being subject to punishment when they follow the law. They

still may be subject to liability for compensatory damages. In pharmaceutical cases,

these damages are substantial, but they should not be punished.

The experience in Ohio can be revealing, because sometimes there may be factual

questions as to whether a particular defendant withheld material information or

made misrepresentations to the FDA regulators; in other words, a question of fact.

When such an issue goes to a jury, it is told that punitive damages are not to be

awarded if a company met the standards of pre-market approval and did not withhold material information or misrepresent the facts. What a jury sometimes hears

is that it should award punitive damages if a defendant did not comply with FDA

regulations. For that reason, in this type of defense there is a certain danger to companies who are reckless or negligent and fail to meet FDA requirements. It exerts

a powerful pressure to follow the law.

MOTIVATION IS NOT SIMPLY BY STICKS, BUT CARROTS

Incentives to follow the law can be positive. Motivation is not brought about by

sticks; carrots help too. In the past twenty years of practice, I have worked with

pharmaceutical companies in a counseling role. I would share with you that a good,

well-drafted FDA punitive damage defense can help bring about good conduct.

FDA rules sometimes are precise, but do leave room for judgment at times. When

client conduct can be assured, going to the ultimate to meet every requirement and

turn over all pertinent information to the FDA (such as adverse risk reports) will

prevent punishment; it can be a factor in motivating conduct that is positive and

goes far beyond the requirements of the black letter of the law. Life experience

teaches us that carrots as well as sticks can motivate good results. A properly constructed FDA defense can do just that, a point that is overlooked or perhaps not

appreciated by those who opppose such provisions because those opponents of a

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sound public policy idea are not and have not been in a position of providing counsel.

CONCLUSION

If one places the words ‘‘Food and Drug Administration’’ into Google( on the Internet, hundreds of thousands of hits come up now because it is very controversial.

This body can and will regulate FDA procedures and rules. What is important to

appreciate today is that state punishment—and that is punitive damages—should

be reserved for unlawful conduct. If a company in good faith comports with the rules

and regulations, and meets the requirements of the organization established by federal law to govern its behavior, monitor it and review it on a national basis, punishment is totally and entirely inappropriate.

I thank you very much for your kind attention, and would be pleased to answer

any questions.

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Mr. DEAL. Thank you.

We will now go to the question phase, and I will start it off.

You have all presented very interesting testimony, although

some of it is somewhat contradictory with the other, but we expect

that because this whole issue is controversial.

Let me start out, Mr. Hurley, if I might, Ms. DeGette had the

slide that was up earlier showing the in and out on premiums from

insurance malpractice premiums versus the payouts. From what

little I understand about the insurance industry, and I must admit

you are really the expert there, on cases of this type in malpractice,

especially where you have injuries that may not present themselves

for many years, where you have statutes that give a statute of

repose before the bringing of actions from an actuarial standpoint,

we are not talking about just an in and out proposition, are we?

We are talking about having to maintain reserves for unknown

claims. We are talking about just the general insurance industry

requirements of reserves, are we not?

Mr. HURLEY. Certainly, Chairman Deal, they—the need is that

insurance companies carry reserves for the liabilities that they

have as of a point in time. It is not simply just in and out as of

a point in time. For example, if an insurance company, particularly

a malpractice insurance company, provides coverage in a given

year or in a given number of years and then stops collecting premiums, stops providing coverage prospectively, it will be years before that company is finished making the payments for which it is

obligated as of the point in time it stopped collecting premium. The

reserves that company carries are the amounts of money set aside

in order to allow it to make that payment, that subsequent payment activity. So when the company stops collecting premium, it

doesn’t stop making payments. It must have reserves in order to

make good on the promises related to the policies that it already

issued.

So yes, it must carry reserves. It is not simply just comparing today’s payments with today’s premiums. That is a mismatch.

Mr. DEAL. One of the statements, Mr. Hunter, that I gathered

from you was with regard to returns that the insurance companies

have recognized. Obviously, an insurance company receiving premiums, like any other business receiving revenue, must invest that

revenue in order to stay in business and, hopefully, make a profit.

Would you acknowledge that during the good years where those investments were being very profitable for the insurance companies

that, in fact, the malpractice premiums were given a break in

terms of the premiums that were being charged simply because the

investments were profitable?

Mr. HUNTER. Yes, I believe that is correct. The investment income does impact the rates. If the investment income goes up, the

rates go down. If the investment income goes down, the rates go

up. But it is true that paid losses over the last 30 years, if you add

them up, are about half—less than half of the premiums that were

collected. And that includes 30 years, so you have caught up with

the lags. So that—I think her chart was——

Mr. DEAL. Did you——

Mr. HUNTER. Even over the long poll.

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Mr. DEAL. Did your calculations on that include litigation expenses?

Mr. HUNTER. No, I am talking now about payouts——

Mr. DEAL. Oh, payouts.

Mr. HUNTER. [continuing] to victims. Yes.

Mr. DEAL. Just to victims.

Mr. HUNTER. But that includes the litigation, the expenses of the

victims but not of the defense.

Mr. DEAL. So if, in fact, most of the cases that are litigated are,

in fact, won, there may not be a payout to the victim, but there is

significant defense costs that are not calculated in your figures?

Mr. HUNTER. Yes, I think of the claims brought against insurance companies, only 23 percent actually result in a payout. Some

are closed with almost no expense, but others are closed with a significant expense, if they go all of the way to a trial, and that

would—that is not in the paid losses, but it is in the total data.

Mr. DEAL. But it is a real outgo in terms of making an insurance

business work?

Mr. HUNTER. Oh, sure.

Mr. DEAL. All right.

Mr. Hurley, did you wish to comment about this further?

Mr. HURLEY. Well, it is hard for me to comment on the comments

that Mr. Hunter has made. But one thing that I—it is not clear to

me is whether, when he says they are comparing premiums and—

premiums to the payouts over time, whether, in fact, he is including the fact that those companies had—are going to stop collecting

premium are still going to be responsible for future payments if

they never collect another nickel in premium.

Mr. DEAL. Right.

Mr. HURLEY. You just can’t compare premium payments and loss

payments. You just can’t compare the two. You do reserves——

Mr. HUNTER. You can over the long pull. You can’t in the short—

over 1 year. I agree.

Mr. DEAL. Dr. Singh, I don’t want to keep you there sitting in

the dark again. I am going to ask you a really quick question, and

I have got 5 seconds.

You have testified on one aspect of this legislation that is proposed, but on the side of recognizing the need for medical malpractice reform, do you agree we need to do something?

Mr. SINGH. Yes, I agree with that. As a practicing physician, I

think I agree. You need to do something with medical malpractice

reform.

Mr. DEAL. Thank you.

Mr. Brown.

Mr. BROWN. Thank you, Mr. Chairman. Thank you for your patience. Thank you all for being here so long and waiting through

all of this.

I am going to request to enter into the record a letter from the

Insurance Commissioner of California, John Garamendi, and also

that any members on either side could submit written questions

since so many people had to leave today.

Mr. DEAL. Without objection.

Mr. BROWN. Thank you.

And I have just a couple of real quick things.

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Mr. Garamendi said that there are three reasons that California

rates have stabilized. MICRA is one of them. Proposition 103 insurance reforms one of them. And what has happened with State,

local, and private programs to eliminate bad practitioners and adequate care. In the like he said, ‘‘It is incorrect to attribute California’s lower medical malpractice rates to any single factor. It is incorrect to use California’s MICRA law as an argument to support

the broad range of actions contemplated in the bill.’’ He said, ‘‘The

bill overreaches and gives wrongdoers protection that is not appropriate.’’ So if I could enter that into the record.

[The letter follows:]

INSURANCE COMMISSIONER

STATE OF CALIFORNIA

February 9, 2005

The Honorable JOHN D. DINGELL

Member, United States Congress

2328 Rayburn House Office Building

Washington, D.C. 20515

DEAR CONGRESSMAN DINGELL: You asked why California’s medical malpractice

rates are lower than the average rates in America. I believe three things account

for this:

1. MICRA: The Medical Injury Compensation Reform Act (MICRA) of 1975, reformed the medical malpractice insurance system in California through implementation of a $250,000 cap on non-economic damages, a limit on attorney fees,

and full disclosure of collateral sources of compensation and periodic payments

for awards over $50,000.

2. Proposition 103 and the resultant rate regulation that has been in effect since

1992.

3. State, local and private programs that eliminate bad practitioners, inadequate

care, and underperforming hospitals and providers. Included in this category

are licensing boards for medical professionals, hospital accreditation, peer review, and group practice peer review.

It is incorrect to attribute California’s lower medical malpractice rates to any single factor. It is incorrect to use California’s MICRA law and the relative advantageous rates in California as an argument to support the broad range of actions

contemplated in the bill before you. MICRA is limited to those issues discussed in

Item 1 above.

I believe that the bill before you overreaches and gives wrongdoers protection that

is not appropriate and may well result in the proliferation of products, services and

procedures that are truly harmful to the public. For example, creating a safe harbor

from product liability for pharmaceutical manufacturers who receive FDA approval

makes no sense in the face of recent mistakes by the FDA and subsequent recalls

of commonly prescribed drugs. If evidence can be produced in a court of law that

establishes that a pharmaceutical is unsafe, and penalties levied against the manufacturer, this will help to protect patients who suffer when the FDA makes the

wrong call. Recent revelations of conflicts of interest and hiding relevant data

should warn you away from this ill-conceived proposal.

As for the nation and this state, the best way to bring medical malpractice rates

under control is to eliminate the possibilities for malpractice. This must be our

focus.

Sincerely,

JOHN GARAMENDI

Mr. BROWN. Thank you, Mr. Chairman.

Dr. Singh, since both the chairman and I feel bad that you have

had to sit there by yourself, my questions are going to you and for

more than 5 seconds, I hope.

You and Dr. Graham with the FDA, my understanding is, have

conducted a large study of heart attacks and COX-2 drugs. Tell us,

briefly, what your conclusions from that study were.

Mr. SINGH. We have conducted a large study in the California

Medicaid population of heart attacks and the COX-2 drugs. It is,

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by far, the largest study ever done and is—and studies more heart

attacks than all of the studies that have been done up so far. The

results of the study were submitted to the FDA about 3 weeks ago,

and it was our expectation that these results would be presented

in a scientific forum during the FDA Advisory Committee meetings

next week. But I have been informed that Dr. David Graham has

been told that he can not present the results of these studies of this

particular study during that meeting. And that is very unfortunate,

I think.

Mr. BROWN. But why is that? Why are you and Dr. Graham not

allowed to?

Mr. SINGH. I do not know. I do not know the answer. No reasons

were given. The FDA has had, now, 3 weeks to look at the results.

It followed a protocol that was very similar to the Kaiser

Permanente FDA protocol that was done, a very carefully done

study. It has meaningful data that answers very important questions that are going to be discussed next week. But Dr. Graham

has been told he can not present the data.

Mr. BROWN. And you have, Dr. Singh, significant concern about

Celebrex, as others have had about Vioxx, correct?

Mr. SINGH. That is hard to say. You know. There is a lot of data

in the study, and I would probably not go on record and tell about

the results of our study on any one given drug. But our data on

Celebrex, as well as on other drugs, puts it into perspective of what

is going on in the whole field with, also, the non-COX-2. And this

is important information that the public, as well as the FDA’s Advisory Committee, needs to hear. And I would rather discuss it in

a scientific forum. And we have given the FDA the opportunity,

shown them all of the results. Dr. Graham is a core investigator

on this study. He knows exactly what was done, how it was done,

what the results are, and he is not being allowed to present it at

the FDA.

Mr. BROWN. Yes, I am just incredulous what has happened to

what I thought was perhaps our government’s best agency, the

Food and Drug Administration. And with this government so

awash in drug company money, the FDA appears more and more

to be a wholly owned subsidiary of the drug industry. And I just

am amazed at the behavior of something like this, not allowing two

scientists, two scientists who have very good reputations, one of

whom works for the FDA, not to who have made national news

with their work, not being allowed to testify. And I—it is just one

more example of the FDA failing to represent the public, in my

mind.

Mr. Chairman, I will yield back the balance of my time.

Thank you, Dr. Singh, for being with us, and thank you all on

the panel.

Mr. DEAL. Thank you, Mr. Brown.

Dr. Norwood.

Mr. NORWOOD. Thank you very much, Mr. Chairman.

I am glad to see so many people that we have seen in here before

at other hearings. We are glad that you are back. And I think, Mr.

Chairman, that if you wish to do an FDA hearing, you have got a

lot of witnesses here that want to testify or, in fact, if you want

to go over H.R. 5, you probably have got a lot of witnesses here who

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wish to testify. But I want to remind us all, that is not what this

hearing is about. And I am so happy to hear your remarks on FDA,

but that is not why we are here.

Now I don’t believe there are many people in Congress, in fact,

I am certain a majority, who don’t believe that we have to do something about medical liability. I—the majority believe that. Now

there is, and always will be, contention on how we best get to that.

I am going to vote for H.R. 5, if I ever see it again, but it is not

because I love it. It is not because I agree with everything in it.

It is not because I don’t believe it can be made better. It is because

it may be the only vehicle where we have a possibility to ever try

to bring these premiums in line and correct a serious problem for

which my—one of my constituents today was right here talking

about and the fact that access to care is getting out of hand. We

have just lost, in Augusta, Georgia, one of the finest neurosurgeons

in the Southeast, because he can’t practice anymore because of frivolous lawsuits, because of what is going on with liability and lack

of reform in controlling the premiums. I don’t know whether $250,000 is right. I will debate that and

have a discussion with anybody about that. But that is not the

point. The point is, there has to be a known number, a known

amount of liability, for people to be able to function in the real

world and practice medicine. And that doesn’t even, Dr. Burgess,

take into consideration for the very costly business of practicing

medicine or practicing law, as physicians do, rather than medicine

for fear of being sued. Now it is clear to me, those of you who want

to have some type of reform, have given us numbers that suit that.

Your studies all show we should. Those of you that don’t want to

have any type of reform have given us another study that refutes

everything that, basically, we are saying needs to be done.

I don’t know why I am surprised. Lawyers don’t agree on things.

And they tend to—one lawyer says it says this and another lawyer

says it says that, and that is sort of what has come out of this

hearing. What we need out of this hearing is some good ideas from

smart people like you how to get this problem under control. And

I am sorry, I don’t believe we got that data today.

I am just curious, and I will conclude, Mr. Chairman. Would each

of you tell me, do you really—do you believe that Congress should

deal with this problem of medical liability that is out of hand? I

know Mr. Hunter says it is not. Somebody else says it is. All I

know is my doctors I live with at home tell me it is out of hand.

And I see it being out of hand in my District. Now does anybody

here think Congress ought not to try to come to a solution? And

if you do, speak up.

Mr. HUNTER. I think Congress should take their time and not

just do a knee-jerk bill. I think you should—you have time because

the premiums last year just rose by 4 percent. We are not in a crisis mode at this point.

Mr. NORWOOD. That is a matter of opinion.

Mr. HUNTER. It is not a matter of opinion. That is reported by

A.M. Best and Company.

Mr. NORWOOD. That is not a matter of opinion.

Mr. HUNTER. It is not.

Mr. NORWOOD. There are plenty of people who think——

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Mr. HUNTER. That is a fact.

Mr. NORWOOD. [continuing] we are in a crisis.

Mr. HUNTER. That is a fact.

Mr. NORWOOD. That is a fact because you believe——

Mr. HUNTER. Oh, no, no, no. There were serious rate increases

at—the 3 previous years, but last year, 4 percent, and the rates are

pretty much flat right now.

Mr. NORWOOD. Is 4 percent correct?

Mr. HUNTER. Yes, 4 percent is correct.

Mr. NORWOOD. I want to hear somebody else tell me that——

Mr. HUNTER. Okay.

Mr. NORWOOD. [continuing] or tell me it is not.

Yes, sir.

Mr. HURLEY. Well, I don’t have the report that Mr. Hunter is referring to, but I think it would be worth investigating. I think it

would be worth checking. Four percent sounds low in light of the—

I see this report.

Mr. NORWOOD. Right. We see reports from everybody, and——

Mr. HUNTER. I didn’t make it up. This is A.M. Best.

Mr. HURLEY. A.M. Best is quoting on the total aggregate premium. The problem with total aggregate premium is it doesn’t

count self-insured programs that are diminishing the amount of

money that is being reported to A.M. Best——

Mr. NORWOOD. Which is my point. If you are not for this, you can

sure as hell come up with a report that allows you to say you are

not for this. I just want to know if there is anybody here that

thinks that the Congress should not deal with this critical problem

in the United States today. I am not asking you whether you believe there ought to be a shield in it or not. I am not asking you

whether you believe it ought to be $250,000 or $1 million. I am

asking you do you believe—anybody not believe that the Congress

must deal with this and it must deal with it now? And maybe we

do have a lot of time, but we have spent my entire career in Congress trying to get here. Now I think we have spent enough time.

I don’t like H.R. 5 either, but I am going to vote for it, because we

need to establish in law there is a limitation to what these juries

can give out or otherwise you are not going to have people to deliver your babies and take care of your child when they hit their

head.

And with that, Mr. Chairman, unless somebody says they think

we ought not to do it, well——

Mr. DEAL. Let us give Dr. Wolfe a real quick response and——

Mr. WOLFE. About 20 seconds. I worked this op-ed in the New

York Times a couple of years ago on the fact that 5 percent of the

doctors account for over half of the malpractice payouts. I think

that there is a crisis of doctor discipline, and I think that one of

the things that Congress here could do is conduct enough research

to figure out why so many medical boards are doing such a bad job

preventing medical malpractice. I think if we prevented a significant chunk of it, that, in and of itself, would bring down the payouts and premiums.

Mr. NORWOOD. Well, you—I don’t totally——

Mr. DEAL. I am going to have to call time.

Ms. DeGette is anxious to get her testimony—her questions in.

155

Ms. DEGETTE. Thank you.

Like all of the other members, Mr. Chairman, I have got a plane

to catch, and like the witnesses. So I will be quick.

I want to ask you a question, Mr. Kingham, because I have been

sitting here all day, and I have been sitting here for 8 years listening about the malpractice insurance crisis that we have that is

forcing doctors to leave the practice of medicine, particularly in lots

of different subspecialties, neurosurgeons, ob-gyns, and others. And

the problem we are grappling with in Congress and in this committee is what, if anything, should Congress do to deal with these

rising medical malpractice insurance rates? I appreciated your testimony today because, frankly, it is the first testimony I can remember hearing about the caps for the pharmaceutical industry.

And I guess I want to ask you a question, because I have been puzzling for a long time, why are we putting these—if the problem is

medical malpractice insurance rates, why have we included the

pharmaceutical industry in this bill? What is the looming problem

for the—are the—is the pharmaceutical industry going to get out

of the business of making drugs if we don’t put these caps on?

Mr. KINGHAM. Well, no, obviously, people are going to stay in the

pharmaceutical business. What has been suggested in a number of

reports by the Institute of Medicine and other organizations over

the years, is that the standardless award of punitive damages and

the possibility that they will be awarded and the risk environment

that that creates discourages research in certain key areas, for——

Ms. DEGETTE. And does that——

Mr. KINGHAM. [continuing] example——

Ms. DEGETTE. Does that affect what happens to physicians then?

Mr. KINGHAM. Yes, it does.

Ms. DEGETTE. Okay. If you could explain that.

Mr. KINGHAM. If it doesn’t—if you don’t have a drug to administer to somebody when they are pregnant because nobody is willing to develop a drug for use in pregnant women, because of liability risks, yes. If you don’t have the latest research in oral contraceptives because people are afraid to go in the oral contraceptive

business and develop new products, yes.

Ms. DEGETTE. Okay.

Mr. KINGHAM. If you don’t have a vaccine to prevent a disease

in a person because people are afraid to be in the vaccine business,

yes, it does affect the practice of medicine.

Ms. DEGETTE. Okay. So my question is, then, is there a risk

right now, under current law, with punitive damages that the

pharmaceutical companies are going to stop making all of those

drugs? And if so, could you supplement your testimony to give us

that evidence?

Mr. KINGHAM. I would be happy to, but there are——

Ms. DEGETTE. Thank you.

Mr. KINGHAM. There have been studies over the years, which

suggest that it does have a perverse influence on willingness to do

research and development in key areas.

Ms. DEGETTE. Now——

Mr. KINGHAM. There is no question about that.

Ms. DEGETTE. [continuing] let us see. Is this Dr. Wolfe here? You

are shaking your head. Can you respond?

156

Mr. WOLFE. Yes. The idea that the pharmaceutical industry, with

its, roughly, 18-percent profit margin, can’t afford to do research

for whatever reason, I mean, that is the—it is the we won’t do research if you control drug prices, something that the Administration seems to have lied about in the Medicare bill. So every time

there is any kind of ‘‘cap’’ to the industry, they say, ‘‘If you don’t

behave, we are not going to do any research.’’ I think it is just a

preposterous kind of statement to make. There is no basis whatsoever for it, as far as I have been able to see, and I have been

watching this for even slightly longer than you have.

Ms. DEGETTE. Thank you.

I want to ask a quick question to Mr. Hunter and Mr. Hurley.

And this is sort of what we were talking about on the last panel,

too. The issue of insurance company rates is a very complex issue.

I think you would both agree with that. And it is something the

committee is struggling with. Is that right?

Mr. HUNTER. Yes, it is complex. Sure.

Ms. DEGETTE. Would either one of you—and if you can both answer for the record, would either one of you have any objection to,

in this bill, including, as part of any bill Congress passed, a study

of insurance—malpractice insurance rates pricing in risk pools?

Mr. HUNTER. I wouldn’t, absolutely not.

Ms. DEGETTE. Mr. Hurley?

Mr. HURLEY. I, professionally, don’t have any view about that. I

mean, I am here for the American Academy, and I am——

Ms. DEGETTE. The Academy doesn’t have a position on that, but

they wouldn’t object to it, would they?

Mr. HURLEY. I don’t know. I would have to check.

Ms. DEGETTE. Okay. Would anybody here object to that kind of

study being included? Okay. I guess that—I take that as a no, just

like Mr. Norwood asked for his response.

Again, I want to thank all of you. I would like to note, Mr.

Schwartz, I noticed in your written testimony you helped write the

tax book I studied tort law from at NYU Law School, so you

have——

Mr. SCHWARTZ. And you are still awake, so that means that

there was something——

Ms. DEGETTE. Well, it was quite a few years ago.

Mr. SCHWARTZ. Yes. Don’t remind me. I am in the 11th edition.

Ms. DEGETTE. Thank you. Thank you, Mr. Chairman. I yield

back.

Mr. DEAL. Thank you, Ms. DeGette.

Dr. Burgess.

Mr. BURGESS. Thank you, Mr. Chairman. And I appreciate everyone’s indulgence through what has been a long afternoon.

I have got a number of questions, and I will go through them as

quickly as I can with the time that is available.

First off, Mr. Hunter, on the table that you have provided us,

and I will just have to tell you what—I started to look through this.

I was afraid you were going to show us fetal heart rate tracings,

but actually they were insurance cycles, so I was relieved about

that.

If I just look at this appendix A, and again, I will confess to you

that I am not very bright about this sort of stuff. But if I just do

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the simple math of the last two columns, direct premiums per doctor 2003 dollars and the paid doctor 2003 dollars and you go from

1975, which was my second year in medical school, up until the

present day, it looks like we went from a ratio of about $4.73 being

paid in for every dollar that was paid out in losses in 1975. Fast

forward to the present and in present-day dollars of $2 in premiums for every dollar paid out. Is that—am I reading that correctly? Am I doing the math——

Mr. HUNTER. That would be right.

Mr. BURGESS. [continuing] right on that? But then these are direct costs——

Mr. HUNTER. Yes.

Mr. BURGESS. [continuing] so the costs that Medical Protective or

Texas Medical Liability Trust spent defending me through these

processes in each of the—any time you are sued, as the young man

testified, it takes a long time to get through the process. So we are

typically talking about several years for one of these cases, if it, in

fact, comes to trial. So there are significant costs on the defensive

side, which we don’t even know about in this form, is that correct?

Mr. HUNTER. That is correct.

Mr. BURGESS. So I guess my take-away from that is the insurance companies probably aren’t overcharging? They may have been

overcharging in 1975 when you were the—Gerald Ford’s Insurance

Commissioner, but they are not overcharging at the present date.

Am I drawing the correct conclusion from your data?

Mr. HUNTER. I don’t conclude anything about overcharging. I—

that is not the point of this. The point of this is that the premiums

go up and down with the cycle and the losses have stayed flat over

the years.

Mr. BURGESS. Well, yes. I would just—in a simple-minded way,

doing the calculations and not being smart enough to calculate cycles, it looks like the insurance companies are doing a whole lot

worse in 2003, in 2003 dollars, than they were the first or second

year I was in medical school.

Let me go——

Mr. HUNTER. Well, except that you—it is the data that underlies

the chart on the top of my page 6, which shows that the losses are

flat.

Mr. BURGESS. And then again, we have heard other testimony,

and in response to Dr. Norwood’s question, that that—there perhaps is another school of thought on that.

Mr. Schwartz, I did appreciate your remarks. I thank you for

being so thorough. I would just ask a question. You made the point

that punitive damages are designed to punish, and obviously, we

want to punish behavior that we don’t want to see again. And these

are—this is a civil proceeding, but these, in fact, are quasi-criminal—it is a punishment. It deals in a quasi-criminal sense. But for

criminals, for drug dealers, we have got sentencing guidelines.

With punitive damages, and I have never understood this, we don’t.

The sky is the limit. You get whatever you guys or the people on

the other side, actually, can prove, you get—is what you get to take

home that day. Do I understand that correctly?

Mr. SCHWARTZ. You do. The——

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Mr. BURGESS. And why are there not sentencing guidelines for

punitive damages? What is the problem with structuring a settlement so that if someone is, in fact, harmed and you don’t want to

see that behavior again, why can the judge not make a recommendation to a jury?

Mr. SCHWARTZ. There are problems for a judge to do that under

the common law. This is a legislative matter, and it is something

that this body or State legislature should do. You have put your

finger on a key point. You have a criminal justice system where

there are certain protections for a substantial fine being levied

against you. In a civil system where the fines could be a billion dollars or a million dollars, there is no structure whatsoever. And I

have had discussions with people who, on the criminal side, want

to be more fair to criminal defendants. But oops, when you are on

the civil side, they just want to—just imagine, in a criminal case,

you said to a jury, ‘‘Okay. You can sentence, and look how you feel,

what your emotions are,’’ and the person’s sentence would be whatever the jury wanted to render. I think that is why this legislation

should include some guidelines like you are suggesting for what

punishment is appropriate.

Mr. BURGESS. Thank you. My time is about expired. Dr. Wolfe,

you mentioned doctor discipline is a problem, and Ms. Rosenbaum,

you indicated that—did I understand you right? You said you

would favor a no-fault system?

Ms. ROSENBAUM. Yes.

Mr. BURGESS. And I truly believe, too, that that is the only way

to really get the issue of patient safety. But, ma’am, we are having

a dickens of a time with the $250,000 cap because of the contingency fees that are present from the plaintiff’s bar in this country.

Do you think we could ever get a no-fault system where you just

took the plaintiff’s bar completely out of the equation? A yes or no

answer will be fine. I have always wanted to do that to a lawyer.

Ms. ROSENBAUM. Yes, I actually think, going back to the question

that Dr. Norwood raised, that it is that issue that actually really

is worth Congress’s time and patience.

Mr. BURGESS. Correct, but the—and Mr. Brown is no longer here,

but he impugned the President’s activity of this field because he

said the President is getting campaign contributions. I don’t know

if anyone cares to do a study on campaign contributions on that

side for the American Trial Lawyers Association, but I suspect they

were pretty evident in the last election as well. You are talking

about a system, a no-fault system, which I, in fact, would embrace,

but a no-fault system is going to remove the contingency fee award

to plaintiffs’ lawyers across the country. I think they will be pretty

upset to read about that.

I will yield back.

Mr. DEAL. Thank you, Dr. Burgess.

Mr. NORWOOD. Mr. Chairman.

Mr. DEAL. Yes, Dr. Norwood.

Mr. NORWOOD. I would like to ask unanimous consent for just 1

minute to sort of finish my statement, if that is agreeable.

Mr. DEAL. Without objection.

Mr. NORWOOD. I thank you, sir.

159

Mr. Wolfe, I don’t know—Dr. Wolfe. Pardon me. I don’t know if

your figures are right that 4 percent of the doctors cause all of the

malpractice awards, but assuming you are, it makes me very happy

that 90 percent—96 percent of that profession is doing everything

it can to help people. They are also doing everything they can to

keep from being sued, which is why we see so much—I don’t require a comment, so much—why we see so much defensive medicine being practiced.

I don’t know whether the people in my District, who had a frivolous lawsuit brought against an ob-gyn clinic of five doctors and

then they had to shut their place down because nobody would sell

them any malpractice insurance. I don’t know if they fit in the 4

percent or the 96 percent. I don’t know if the doctors in Athens,

Georgia, who closed the emergency room clinic there because they

couldn’t get any malpractice insurance because of a frivolous lawsuit, I don’t know whether they fit in the 4 percent or 96 percent.

What I do know is that we absolutely have to deal with this problem, and even if we don’t get it right, we have got to limit liability

to some number.

Mr. Chairman, I appreciate your opportunity to finish that up.

Mr. BURGESS. Mr. Chairman.

Mr. DEAL. Yes.

Mr. BURGESS. May I ask for unanimous consent that we ask Dr.

Singh to send us the data that he has provided to the FDA and

has not been allowed to speak on?

Mr. DEAL. Yes, without objection.

And anyone else that has any further information that you wish

to submit would be appropriate as well.

This is, indeed, a very distinguished panel, and we do appreciate

your——

Mr. BURGESS. Mr. Chairman.

Mr. DEAL. Yes.

Mr. BURGESS. May I ask, the same as Dr. Norwood, for the indulgence of an additional minute. We have assembled these——

Mr. DEAL. Without objection. Yes.

Mr. BURGESS. Dr. Singh, just briefly, how many doses of Vioxx

were taken during the time that drug was on the market?

Mr. SINGH. I am sorry. I don’t have the number here with me.

We have done a study on that.

Mr. BURGESS. Okay. How——

Mr. SINGH. It has been hundreds of millions. Hundreds of millions.

Mr. BURGESS. And how many—let us just leave it with fatal

heart attacks. How many fatal heart attacks do you estimate were

caused by Vioxx?

Mr. SINGH. That is a very difficult number to reach, and Dr.

David Graham has done calculations based on his study——

Mr. BURGESS. And you are going to share that data——

Mr. SINGH. [continuing] and he estimates is at about 130,000.

Mr. BURGESS. 130,000. And you are going to share that data with

us.

Mr. SINGH. But that is Dr. David Graham’s data. That data is

out in the public domain.

160

Mr. BURGESS. Okay. And your—but you are going to share your

data with us as well.

Mr. SINGH. Yes, our data we didn’t look at the total number of

heart attacks——

Mr. BURGESS. Okay.

Mr. SINGH. [continuing] caused. We just looked at what the different drugs do in comparison to each other.

Mr. BURGESS. Very well.

Mr. Kingham, finally, you talked about the vaccine injury compensation fund, and I think that was a wonderful thing that was

done and did allow vaccines to be available without the costs being

exploded, but we saw what happened with that in the—when you

can’t sue the vaccine manufacturer, sue the guy that puts the preservatives in the bottle. And that was kind of an unfortunate result

of that. I think your testimony that you have to—the protections

have to extend across the spectrum or there are no protections at

all, I think that you really underscored that point, and I thank you

for bringing it to us. I think I understood a little better today than

I have ever understood it before.

The psychiatrist, Dr. Glenmullen left. I would just make the

point about psychiatry and antidepressants and suicide. When I

was in medical school in the 1970’s, we didn’t have selective

seratonin reuptake inhibitors like he was talking about today. We

had a class of compounds called the tricyclic antidepressants. Even

back then, way back in the dark ages of psychiatry, we were told

that if you start a patient on a tricyclic antidepressant, watch out,

because within the first couple of weeks, they are likely to become

more suicidal as they start to feel better. Initially, they are so depressed they can’t think about suicide. As they start to feel a little

better, it starts to cross their mind again, and maybe they feel good

enough to act upon it.

So that has been in the psychiatric jargon for—and domain for

a long, long period of time. I don’t dispute what he is saying about

the SSRIs in children, and I think, certainly, the managed care has

done nothing for the practice of psychiatry in this country. It simply underscores that a child on a selective seratonin reuptake inhibitor needs to be under the care of a board-certified psychiatrist,

and preferably a child psychiatrist. These are potent medications.

But when used as—in the proper way, they may provide a great

deal of benefit.

Thank you, Mr. Chairman, for your indulgence.

Mr. DEAL. Well, thank you all.

Thanks especially to our panel members, and thank you for your

indulgence in the time delays that we have had today. We thank

you very much and look forward, perhaps, to seeing some of you

again.

[Whereupon, at 5:13 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

161

1The American Academy of Actuaries is the public policy organization for actuaries practicing

in all specialties within the United States. A major purpose of the Academy is to act as the

public information organization for the profession. The Academy is non-partisan and assists the

public policy process through the presentation of clear and objective actuarial analysis. The

Academy regularly prepares testimony for Congress, provides information to federal elected officials, comments on proposed federal regulations, and works closely with state officials on issues

related to insurance. The Academy also develops and upholds actuarial standards of conduct,

qualification, and practice, and the Code of Professional Conduct for all actuaries practicing in

the United States.

AMERICAN ACADEMY OF ACTUARIES

February 22, 2005

The Honorable NATHAN DEAL

Chairman, Subcommittee on Health

Committee on Energy and Commerce

U.S. House of Representatives

Washington, D.C. 20515

DEAR CHAIRMAN DEAL: As a representative of the American Academy of Actuaries 1, I am writing this letter as a clarification to information provided to your subcommittee during the February 10 hearing on medical liability issues. In discussions

of medical malpractice premium, Mr. Robert Hunter quoted a four percent (4%)

medical malpractice premium growth from AM Best’s Review and Preview. Because

this statistic was inconsistent with my experience and expectations, I contacted AM

Best and asked for an explanation of the relatively small change considering all the

premium rate increases implemented by many of the reporting companies. According to AM Best, the calculation was not adjusted for the fact that some companies

stopped reporting information in 2004. Ordinarily this would not have been a significant problem except that one of the largest writers of medical malpractice in the

United States stopped reporting data in 2004 causing the premium increase of 2004

over 2003 to be distorted. Mr. Hunter’s observation that ‘‘. . . the cycle has turned

and the crisis is over,’’ at least based on this statistic, seems unsupported.

Although aggregated Best premium data is sometimes used as an indicator of increases in rates, it can only be an approximation. Increases in self-insured retentions, deductibles and captive formations erode the year-to-year growth in premium

and make this statistic less effective as an indicator of increasing rates. In the case

of 2004, the change in reporting companies has also distorted the comparison. In

my experience, the rate increases implemented in 2004, at least for most jurisdictions, were substantially more than four percent.

It was a pleasure to have met you and if the Academy can provide additional information, please let us know.

Sincerely,

JAMES D. HURLEY ACAS, MAAA

Member, Medical Malpractice Subcommittee

AMERICAN BAR ASSOCIATION

GOVERNMENTAL AFFAIRS OFFICE

February 16, 2005

The Honorable NATHAN DEAL

Chairman

Subcommittee on Health

Committee on Energy and Commerce

U.S. House of Representatives

Washington, DC 20515

DEAR MR. CHAIRMAN: I am writing to you on behalf of the American Bar Association regarding the February 10, 2005 Subcommittee’s hearings on medical liability

to present ABA views on federal proposals to pre-empt state medical liability laws.

The ABA, which has over 400,000 members throughout the country has long opposed legislation that would pre-empt the state tort laws and impose federal medical

professional laws on the states.

It has been suggested by some that enactment of such legislation would help the

uninsured. This is simply not the case. Limiting compensation to those who have

been inured by medical malpractice will not help the uninsured gain access to

health insurance. While limiting medical malpractice awards would have a major

impact on those patients most severely injured by malpractice, it would have only

a minor impact on national health care costs. According to the Congressional Budget

Office, malpractice costs make up less than 2 percent of overall health care spendVerDate 11-MAY-2000 11:17 Nov 29, 2005 Jkt 000000 PO 00000 Frm 00165 Fmt 6633 Sfmt 6621 20143.TXT HCOM1 PsN: HCOM1
162

ing. The CBO also reports that even if malpractice costs were reduced by 25 to 30

percent, it would only lower health care costs by 0.4 to 0.5 percent would likely have

a comparably small effect on insurance premiums.

The ABA is especially concerned about proposals that would place a cap on pain

and suffering awards in states that have no such cap for patients that have proved

in their state courts that they were harmed by malpractice or a defective medical

product. Those affected by caps on damages are the patients who have been most

severely injured by negligence of others. No one has stated that their pain and suffering injuries are not real or severe. These patients should not be told that, due

to an arbitrary limit, they will be deprived of the compensation they need to carry

on. Yet legislation to cap pain and suffering awards, if enacted, would result in the

most seriously injured persons who are most in need of recompense receiving less

than adequate compensation.

The reallying cry of proponents of this type of legislation has been that doctors

have experienced significant increases in their insurance premiums. Insurance premiums in a number of areas are up significantly. Pre-empting the state tort laws

and limiting the rights of patients to be compensated for malpractice and harm

caused by defective medical products will not solve this problem. Caps on non-economic damages have failed to prevent sharp increases in medical malpractice insurance premiums, according to a white paper comparing states with caps to states

without caps that was released June 2, 2003, by Weiss Ratings, Inc., an independent

provider of ratings and analyses of financial services companies, mutual funds and

stocks.

For over 200 years, the authority to promulgate medical liability laws has rested

with the states. The system, which allows each state autonomy to regulate the resolution of medical liability actions within its borders, is a hallmark of our American

justice system. Because of the role they have played, the states are the repositories

of experience and expertise in these matters. Thus the ABA urges your subcommittee not to approve Legislation that would pre-empt the states’ medical liability laws.

In addition to the policy reasons why this long- and effectively-functioning liability

system should not be altered by the U.S. Congress, it should be noted that the constitutionality of the amendment will surely be challenged based on constitutional

separation-of-powers grounds. The Supreme Court, in the decisions of Pegram et al.

v. Hendrich, 120 S.Ct. 2143 (2002), and Rush Prudential HMO, Inc. v. Moran, 122

S.Ct. 2151 (2002), continued to recognize that it is appropriate for the states to handle health accountability matters because health care is an area traditionally left

to the states to regulate. In addition, a number of states have constitutions that prohibit caps on damage awards in personal injury cases.

Currently, states have the opportunity to enact and amend their tort laws, and

the system functions well. Congress should not substitute its judgement for the systems which have thoughtfully evolved in each state over time. To do so would limit

the ability of a patient who has been injured by medical malpractice or by defective

medical products to receive the compensation he or she deserves.

The ABA is concerned about those in America who are without health insurance.

Since 1772, the ABA has been on record supporting access to quality health care

for every American regardless of the person’s income. In February, 1994, the ABA’s

House of Delegates reaffirmed its support of legislation calling for universal coverage for all through a common public or public/private mechanism through which

all contribute. But federal legislation to pre-empt state liability laws would not help

the situation.

We request that you include this letter in the record of your February 10 hearings. Thank you.

Sincerely,

ROBERT D. EVANS

Cc: Members of the Subcommittee on Health

PREPARED STATEMENT OF THE JOINT COMMISSION ON ACCREDITATION OF

HEALTHCARE ORGANIZATIONS

The Joint Commission on the Accreditation of Healthcare Organizations is pleased

to submit testimony for the record to the House Energy and Commerce Health Subcommittee’s hearing on medical malpractice reform, held on February 10th. The

Joint Commission is the nation’s oldest and largest standard setting and accrediting

body in health care. Approximately 15,000 health care organizations are currently

accredited by the Joint Commission, including the preponderance of U.S. hospitals.

Our mission is to continuously improve the safety and quality of care provided to

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the public. Under its Public Policy Initiatives—which focus on broad issues that

have the potential to seriously undermine the provision of safe, high-quality health

care and, indeed the health of the American people—the Joint Commission’s convened an expert roundtable to address strategies for improving the medical liability

system and preventing patient injury.

On February 10, 2005, the Joint Commission released the results of the roundtable discussions in a white paper entitled ‘‘Health Care at the Crossroads: Strategies for Improving the Medical Liability System and Preventing Patient Injury.’’ Its

recommendations center around one very basic fact: there is a fundamental dissonance between the medical liability system and the patient safety movement.

While patient safety depends on transparency of information as the basis for improvement the current system drives too much of that information underground. As

a result, neither patients nor providers benefit.

The paper is a call to action for those who influence, develop or carry out policies

that will lead the way to resolution of the issue. For the Committee’s consideration,

we have attached the conclusions and recommendation presented in the white

paper. The complete document can be found at http://www.jcaho.org/about+us/

public+policy+initiatives/tort—resolution.htm.

RECOMMENDATIONS FROM ‘‘HEALTH CARE AT THE CROSSROADS: STRATEGIES FOR

IMPROVING THE MEDICAL LIABILITY SYSTEM AND PREVENTING PATIENT INJURY’’

Recommendation I: Pursue Patient Safety Initiatives that Prevent Medical Injury

When the Institute of Medicine (IOM) released its landmark report, To Err Is

Human,1 the frequent occurrence of medical error went public. Now, five years after

the IOM report, error remains ubiquitous in health care delivery. To be sure, activities and initiatives aimed at improving patient safety have been and continue to be

pursued. However, there are obstacles within health care organizations that stymie

improvement—most notably, lack of will, resources and knowledge.

The axiom, ‘‘you learn from your mistakes’’ is too little honored in health care.

Near-miss and error reporting is an essential component of safety programs across

safety-conscious industries. Within health care, though, many physicians are often

reluctant to engage in patient safety activities and be open about errors because

they believe they are being asked to do so without adequate assurances of legal protection.2 The stifling specter of litigation results in the under-reporting of adverse

events by physicians and avoidance of open communications with patients about

error.3

The IOM report suggests that 90 percent of medical errors are the result of failed

systems and procedures that are poorly designed to accommodate the complexity of

health care delivery. If properly designed, these systems and procedures could better

prevent inevitable human errors from reaching patients. But understanding the root

causes of errors requires their divulgence in the first place. In sharp contrast to the

systems-based orientation of the patient safety movement, tort law targets individual physicians.4

I.a Strengthen oversight and accountability mechanisms to better ensure the competencies of physicians and nurses

As the IOM reports make clear, multiple broken systems can be identified in the

majority of cases in which a serious adverse event has occurred. However, there remains today too little effort to unveil the specific contributory factors to such occurrences. That said, a systems-based approach to quality improvement does not preclude individual accountability. Accountability mechanisms—licensure, certification,

and peer review—also need to be strengthened to ensure an optimally qualified

health care workforce. The tort system should not be the net to snare incompetent

physicians, and it cannot be effective, when it is cast so wide.

The American Board of Medical Specialties (ABMS) is now in the process of implementing encompassing new requirements for the maintenance of board certification

for the 24 medical specialties it represents. These requirements would eventually

apply to over 90 percent of practicing physicians. Following suit, the Federation of

State Medical Boards is also pursuing an agenda for the maintenance of physician

licensure.

While the legal system is often maligned by physicians, some physicians do not

hesitate to use it to stave off loss of hospital privileges and licensure. Going forward,

to avoid the quagmire in which hospitals often find themselves when they attempt

to curtail or remove privileges, these institutions need to be thorough and deliberate

in their initial granting of privileges, to consider granting new privileges for shorter

periods of time, and to apply objective measures of performance before renewing

privileges. This approach would be synchronous with the movement of certification

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boards to grant time-limited board certification, and to undertake rigorous competency assessment on a continuing basis.

Administrative and clinical leadership must also take greater initiative to ensure

the competency of their nurses. Nurse staffing shortages have made the hiring of

new nurses a priority, but newly graduated nurses typically receive far too little

training before assuming clinical responsibilities, and the monitoring of clinical performance is uneven at best. The growing use of external staffing agencies to fill

staffing gaps only makes this problem worse.

I.b Allow health care researcher access to open liability claims to permit early identification of problematic trends in clinical care

One of health care’s principal patient safety success stories is anesthesiology. The

American Society of Anesthesiologists uses case analysis to identify liability risk

areas, monitor trends in patient injury, and design strategies for prevention. Today,

the ASA Closed Claims Project—created in 1985—contains 6,448 closed insurance

claims. Analyses of these claims have, for example, revealed patterns in patient injury in the use of regional anesthesia, in the placement of central venous catheters,

and in chronic pain management. Results of these analyses are published in the professional literature to aid practitioner learning and promote changes in practices

that improve safety and reduce liability exposure.

Closed claims data analysis is the one way in which the current medical liability

system helps to inform improvements in care delivery. However, reliance on closed

claims for information related to error and injury is cumbersome at best. It may

take years for an insurance or medical liability claim to close. These are years in

which potentially vital information on substandard practices remains unknown. Providing patient safety researchers with access to open claims, now protected from external examination, could vastly improve efforts aimed at identifying worrisome patterns in care and designing appropriate safety interventions.

I.c Encourage appropriate adherence to clinical guidelines to improve quality and reduce liability risk

Adherence to clinical guidelines has long been touted as an effective way in which

to improve quality, reduce variation in care, and improve financial performance.5 In

court, clinical guidelines are increasingly invoked to prove or disprove deviations

from the standard of care. But there is a more significant relationship between medical liability and clinical guidelines. A new study has shown that adherence to clinical guidelines can have a significant role in reducing legal risk.6 The study, which

focused on obstetrical patients, found a six-fold increase in risk of litigation for cases

in which there was a deviation from relevant clinical guidelines.7 Further, one-third

of all obstetric claims analyzed in the study were linked to non-compliant care.8

I.d Support teamwork development through team training, ‘‘Crew Resource Management,’’ and high-performing microsystem modeling

Teamwork—indeed, team training—has been identified by patient safety experts

as an essential factor in reducing the risk of medical error. In aviation, ‘‘Crew Resource Management’’ (CRM) is the methodology used to guide team development

among pilots, flight attendants and other crew. In this context, predefined roles and

responsibilities for various scenarios help to assure the safety of every flight. Consistently applying such an approach to health care delivery could increase the timeliness and accuracy of communications—breakdowns of which are commonly implicated sources of serious adverse events. This could also help to enlist clinicians and

support staff in committing to a common goal—safe and effective care—in the often

high-pressure and chaotic environments of health care. Unfortunately, health care

professionals are not educated and trained to work as teams or even team members.

Recreating the culture of health care delivery to value team-based care must begin

at the earliest point of intervention—health care professional education—and be

continuously reinforced in practice.

Clinical units that successfully foster strong team-based approaches to health care

delivery do exist. In their research, Nelson, Batalden et al identified high-performing, front-line clinical units called microsystems.9 A microsystem is further defined as a small group of people who regularly work together to provide care to discrete sub-populations of patients, and share business and clinical aims, linked processes, and a common information environment.10 Microsystems are often embedded

in larger organizations—the ‘‘macrosystem.’’

High-performing microsystems produce superior outcomes and cost-effective care,

and at the same time, provide positive and attractive working environments.11

These units are also characterized by the high value placed on patient safety, as

well as compliance with policies and other requirements.

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I.e Continue to leverage patient safety initiatives through regulatory and other quality oversight bodies

A study recently published in Health Affairs by Devers et al concludes that the

major driver for hospital patient safety initiatives is Joint Commission requirements.12 The majority of hospitals surveyed as part of the study explicitly noted that

they were working to meet Joint Commission requirements—developing better processes for reporting, analyzing, and preventing sentinel events; meeting patient safety standards, including acknowledgement of leadership’s accountability for patient

safety and the creation of a non-punitive culture; and meeting the specific national

patient safety goals.13

In the Devers et al study, the description of hospital patient safety initiatives also

highlights the influence of other third parties in driving patient safety improvements. The Leapfrog Group was frequently mentioned by study participants, particularly with regard to its influence in driving the adoption of Computerized Physician Order Entry (CPOE) systems.

I.f Encourage the adoption of information and simulation technology by building the

evidence-base of their impacts on patient safety, and pursue proposals to offset

implementation costs

In its Crossing the Quality Chasm report, the IOM underscores the importance

of information technology as a key factor in meeting several of its quality aims.

Since then, the momentum toward widespread adoption of information technology

has accelerated. Leading proponents include the National Alliance on Healthcare Information Technology, the Markle Foundation’s Connecting for Health initiative,

and now the Department of Health and Human Services (HHS) itself, with the appointment of a national coordinator for IT initiatives last year.

I.g Leverage the creation of cultures of patient safety in health care organizations

The pressures on health care leaders today are great. Increasing costs, increasing

demand for services, and unfavorable reimbursement policies mean that patient

‘‘throughput’’—the time in which patients move into, through, and out of the health

care setting—must be accelerated to maintain revenues. This acceleration of the

care process heightens the risk of medical error, and compromises effective patientpractitioner communications.14 Yet, in this environment, a culture of patient safety

must be created and emulated from the top down. This responsibility lies both with

individual health care organizations and practitioners, and with those who set

health care policy in this country.

I.h Establish a federal leadership locus for advocacy of patient safety and health care

quality

Until this country both elevates the importance of quality and safety problems

and engages in a coordinated approach to solutions, it will be difficult to make significant strides in addressing the foundational patient safety problems that persist

today. Creation of an Office of Health Care Quality in HHS could provide a powerful

platform for setting priorities and direction for improving patient safety and health

care quality. Such an office could also coordinate and enhance the efforts of established private and public sector bodies already engaged in patient safety and quality

improvement activities.

I.i Pursue ‘‘pay-for-performance’’ strategies that provide incentives to focus on improvements in patient safety and health care quality

New public and private sector payer initiatives designed to ‘‘pay for performance’’

may provide a new opportunity to align incentives for increasing safety and improving quality and patient outcomes. In 2003, CMS launched a demonstration project

in partnership with Premier Inc. to test the effectiveness of paying hospitals more

for better performance according to selected measures. In 2005, a new demonstration project was initiated for large medical group practices. Small but symbolically

significant bonuses are to be based on results in the management of specific clinical

conditions and procedures. The pay-for-performance concept essentially envisions rewards for desired behaviors and outcomes.

Recommendation II: Promote Open Communication Between Patients and Practitioners

Lack of disclosure and communication is the most prominent complaint of patients, and their families, who together have become victims of medical error or negligence. Years of expensive and wounding litigation often ensue when families are

sometimes only seeking answers.

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II.a Involve health care consumers as active members of the health care team

Health care consumers are playing an important role in the patient safety movement—as educated advocates for change based on their own experiences. When individuals’ stories reach the right audience, listeners pay heed. Health care consumers

can specifically help to prevent adverse events by being active, informed, and involved members of the health care team. For patients and family members, the

physical and emotional devastation of medical error cannot be easily overcome.

What they want most out of their ordeal is honest and open dialogue about what

went wrong, and a ‘‘legacy’’—having their experience serve as a lesson for prevention in the future.15 Seldom are such communications and assurances forthcoming.

II.b Encourage open communication between practitioners and patients when an adverse event occurs

An unintended consequence of the tort system is that it inspires suppression of

the very information necessary to build safer systems of health care delivery. When

it comes to acknowledging and reporting medical error, there is too often silence between practitioners and patients; practitioners and their peers; practitioners and the

organizations in which they practice; and health care organizations and oversight

agencies.

One of the basic principles of patient safety is to talk to and listen to patients.16

Several elements are fundamental to any disclosure effort. These include a prompt

explanation of what is understood about what happened and its probable effects; assurance that an analysis will take place to understand what went wrong; follow-up

based on the analysis to make it unlikely that such an event will happen again; and

an apology.17

The Joint Commission’s accreditation standards require the disclosure of sentinel

events and other unanticipated outcomes of care to patients, and to their family

members when appropriate. A recent study confirms that many hospitals—half of

those surveyed—are reluctant to comply with this standard for fear of medical liability suits.18 If disclosure is taken a step further to the offer of an apology, hospitals and physicians are even more likely to gravitate to traditional ‘‘defend and

deny’’ behaviors. But there is increasing awareness that openness has the potential

to heal, rather than harm, the physician-patient relationship. A growing number of

hospitals, doctors and insurers are coming around to the idea that apologies may

save money by reducing error-related payouts and the frequency of litigation.19

II.c Pursue legislation that protects disclosure and apology from being used as evidence against practitioners in litigation

Today, some prominent medical centers have adopted policies that urge doctors

to disclose their mistakes and to apologize.20 Insurers, too, are increasingly urging

apologies.21 And, a growing number of states are passing laws that protect an apology from being used against a doctor in court.22 More such protections will be needed in order for most caregivers and organizations to feel comfortable with apologies,

despite the ethical imperatives underlying such disclosure.

II.d Encourage non-punitive reporting of errors to third parties that promotes sharing

of information and data analysis as the basis for developing safety improvement

strategies

Few caregivers and health care organizations voluntarily break through the wall

of silence to report life-threatening medical errors beyond the walls of their institutions. The Joint Commission has had a voluntary reporting system since 1996, but

its Sentinel Event Database receives only about 400 new reports of events each

year—well below the 44,000 to 98,000 deaths related to medical error estimated by

the IOM to occur each year.

A number of states now have mandatory error reporting systems of various

types.23 One of the most active, the New York State Patient Occurrence Report and

Tracking Systems (NYPORTS), logged approximately 30,000 reports in 2003.24 A

new reporting system in Pennsylvania captures reports of near-misses as well as actual errors. Reporting systems can capture enormous volumes of data, but without

the requisite resources to analyze and translate data into useful information, their

potential is far from being fully realized. Other types of external reporting systems

include voluntary reporting systems tailored to specific health care segments and

medical specialty-based reporting systems.25

There remains a substantial lack of clarity as to whether error analyses reported

to a third-party, such as a state agency or the Joint Commission, are afforded legal

privilege protections. This lack of certainty of protection continues to hamper reporting efforts that could otherwise yield essential information for making breakthrough

improvements in health care safety.

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II.e Enact federal patient safety legislation that provides legal protection for information reported to designated patient safety organizations

Patient safety legislation—under consideration by the Congress for several years

and currently pending reintroduction in the current Congress—proposes legal protection for information reported to any Patient Safety Organization, as defined in

the legislation. Passage of patient safety legislation of this nature would provide the

cornerstone for effective reporting systems that assure confidentiality and encourage

the sharing of lessons learned from the analyses of adverse events.

Recommendation III: Create an Injury Compensation System that is Patient-Centered

and Serves the Common Good

Only a small percentage (2 to 3 percent) of patients who are injured through medical negligence ever pursue litigation, and even fewer ever receive compensation for

their injuries.26 Those who are awarded compensation wait an average of five years

to receive it.27 Clearly, the current tort system falls short in compensating injured

patients. As for exacting justice, there is often little correlation between court findings of negligence and actual negligence.28 And rather than deterring negligence,

there is a common refrain among physicians that the current tort system ‘‘keeps us

from doing things that we, as good professionals, would naturally do.’’ 29

A central question is how the medical liability system can be restructured to actively encourage physicians and other health care professionals to participate in patient safety improvement activities.30 The goal of any such restructuring should be

to reduce litigation by decreasing patient injury, by encouraging open communication and disclosure among patients and providers, and by assuring prompt and fair

compensation when safety systems fail.

III.a Conduct demonstration projects of alternatives to the medical liability system

that promote patient safety and transparency and provide swift compensation to

injured patients

Numerous proposals have been suggested for improving the medical liability system. These proposals center on three broad approaches: (1) creation of alternative

mechanisms for compensating injured patients, such as through early settlement offers; (2) resolving disputes through a so-called ‘‘no-fault’’ administrative system or

through health courts; and (3) shifting liability from individuals to organizations.31

Though these approaches are distinct, they are not in conflict. One could imagine

an injury resolution system that incorporates the characteristics of all three.

Inherent in any alternative to the current tort system must be a high priority for

disclosure—an acknowledgement of the error or injury, an apology, and assurances

that steps will be taken to avoid such an error in the future.

A 2003 IOM report calls for demonstration projects to test the feasibility and effectiveness of alternative injury compensation systems that are patient-centered and

focused on safety.32 Such demonstration projects are needed to begin the process of

mitigating the periodic medical liability crises that, aside from economic factors, result from the delivery of unsafe care, unreliable adjudication of claims, and unfair

compensation for injured patients.

III.b Encourage continued development of mediation and early-offer initiatives

Some states and liability insurance companies are already pursuing reforms to reduce reliance on litigation as a means to resolve injury claims. In 2002, Pennsylvania became the first state to require hospitals to disclose, in writing, adverse

events to patients or their families.33 Nevada and Florida have since followed Pennsylvania’s lead.34 Pennsylvania is also the site of a Pew-sponsored demonstration

project that encourages mediated dispute resolution.35 As part of this model, physicians are encouraged to disclose adverse events to their patients and to apologize.36

Patients or their families are provided with an early and fair offer of compensation,

and the opportunity for mediation to resolve disputes.37 It is too soon to know the

full ramifications of the Pew-sponsored project, but early indications are that it has

been successful in mitigating litigation.38

COPIC Insurance Company, a physician-owned liability insurer in Colorado, initiated its ‘‘3Rs’’ (respect, respond and resolve) program in 2000. Under this program,

each insured physician is encouraged to communicate openly with the patient if an

adverse event occurs, and to offer an apology when warranted.39 COPIC pays for

patient expenses, and also reimburses for lost wages.40 Importantly, patients are not

asked to waive their rights to litigation.41 Since its inception, none of the cases addressed through the 3Rs program has gone to litigation.42

Comprehensive medical liability reform is the long-term solution for resolving the

issues inherent in today’s system, but there are actions that can be taken in the

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intermediate term that would bring greater integrity and transparency to the process.

III.c Prohibit confidential settlements—so-called ‘‘gag clauses’’—that prevent learning

from events that lead to litigation

Medical liability claims are often settled before they reach trial, or before the trial

ends in judgment. Terms of these settlements typically include a ‘‘gag clause’’ that

requires the confidential sequestering of all information related to the case. Such

confidential settlement offers may encourage quick resolution, but this is achieved

at the cost of forever barring access to potentially important information that could

be used to improve the quality and safety of care.

III.d Redesign or replace the National Practitioner Data Bank

Physicians named in medical liability judgments and settlements, as well as disciplinary actions, are reported to the National Practitioner Data Bank (NPDB). The

primary reason for the existence of the NPDB is to permit hospitals and licensing

boards to track incompetent physicians. Since its inception, questions have continued to be raised about the validity and reliability of the NPDB.43 A 2000 General

Accounting Office (GAO) report cited a multitude of NPDB problems, including

underreporting of disciplinary actions, which, the report states, is a far better expression of physician competence than medical liability claims.44 In fact, medical liability claims data constitute 80 percent of the information contained in the

NPDB.45 The information the data bank contains is also characterized in the GAO

report as substantially incomplete—lacking,, for example, any information as to

whether the standard of care was considered when a claim was settled or adjudicated.46

There is a need for a centralized information or sources that reliably capture important inputs about the performance of physicians and other practitioners, but

other options than the NPDB exist. For instance, the Federation of State Medical

Boards (FSMB) regularly makes information on disciplinary actions taken against

physicians publicly available. It has now been five years since the release of the

GAO report critical of the NPDB, and no substantial progress has been made to implement its recommendations. Given the relative ineffectiveness of the NPDB, it either needs to be substantially redesigned or its responsibilities need to be reassigned to other more reliable information repositories.

III.e Advocate for court-appointed, independent expert witnesses to mitigate bias in

expert witness testimony

Accountability for health care professional competency lies with the individual

and his or her licensing and certification boards, and employers. This accountability

should increasingly extend to the conduct of physicians who act as expert witnesses

in medical liability cases. As many who have participated in a medical liability case

can attest, expert opinion is subject to substantial potential bias when that opinion

is paid for by either the defendant or the plaintiff in a case.47 According to the Federation of State Medical Boards, expert witnesses who give false or misleading testimony are subject to disciplinary action.48 In the long term, court-appointed experts

that are independent of either plaintiffs or defendants are more likely to provide objective support to the litigation process.

It is clearly time to actively explore and test alternatives to the medical liability

system. The goal of such alternatives is not to legally prescribe ‘‘blame-free’’ cultures. Rather, the goal is to stimulate the creation of ‘‘just cultures,’’ that is, health

care environments that foster learning—including learning from mistakes—but that

also emphasize individual accountability for misconduct. Inherent in any viable alternative for addressing medical liability claims should be the potential for fairly

compensating greater numbers of injured patients, while allowing health care practitioners and providers the opportunity to reveal error, learn from such errors, and

ensure that they are not repeated.

Redesigning the medical liability system will necessarily be a long-term endeavor.

Meanwhile, more and continued efforts aimed at fostering transparency among provider organizations, practitioners, and patients; seeking alternatives to litigation;

leveraging the development of patient safety cultures; treating health care providers

fairly; and honoring patients are both noble goals and practical necessities that

must be actively pursued.

References

1 Institute of Medicine, To Err is Human: Building a Safer Health System, National Academies

Press: 2000 2Studdert et al

3 Ibid

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4 Ibid

5 Ransom, Scott R., Studdert, David M., et al, ‘‘Reduced medicolegal risk by compliance with

obstetric clinical pathways: A case-control study,’’ OB/GYN, 101:4, April 2003 6 Ibid

7 Ibid

8 Ibid

9 Nelson, Eugene C., Batalden, Paul B., et al, ‘‘Microsystems in health care: Part 1. Learning

from high-performing front-line clinical units,’’ The Joint Commission Journal on Quality Improvement, September 2002:472-493 10 Ibid 11 Ibid 12Devers, Kelly J., Pham, Hoangmai H., Liu, Gigi, ‘‘What is driving hospitals’ patient-safety

efforts?’’ Health Affairs, 23:2, March/April 2004 13 Ibid 14Sage 15Gibson, Singh 16Mohr, Julie J., Barach, Paul, et al, ‘‘Microsystems in health care: Part 6. Designing patient

safety into the microsystem,’’ Joint Commission Journal on Quality and Safety, 29:8, August

200317 Ibid 18Devers et al 19Zimmerman, Rachel, ‘‘Doctors’ new tool to fight lawsuits: Saying I’m sorry,’’ Wall Street

Journal, May 18, 2004 20 Ibid 21 Ibid 22 Ibid 23Wachter, Robert M, Shojania, Kaveh, Internal Bleeding: The Truth Behind America’s Terrifying Epidemic of Medical Mistakes, Rugged Land, February 2004 24 ibid 25Suresh, Gautham, Horbar, Jeffrey D., Plesk, Paul et al, ‘‘Voluntary anonymous reporting of

medical errors for neonatal intensive care,’’ Pediatrics, June 2004 26Studdert, et al 27 Ibid 28 Ibid 29 Comment at roundtable meeting 30Sage 31Studdert, et al 32 Ibid 33Liebman, Carol B., Hyman, Chris Stern, ‘‘A mediation skills model to manage disclosure of

errors and adverse events to patients,’’ Health Affairs, July/August 2004 34 Ibid 35 Ibid 36 Ibid 37 Ibid 38 Ibid 39 COPIC’s 3Rs Program, Volume 1, Issue 1, March 2004, viewed on the website, copic. com 40 Ibid 41 Ibid 42 Ibid 43General Accounting Office, National Practitioner Data Bank: Major improvements are needed to enhance Data Bank’s reliability, GAO-01-130, November 2000 44 Ibid 45 Ibid 46 Ibid 47Posner, Karen L., Caplan, Robert A., Cheney, Frederick W., ‘‘Variation in expert opinion in

medical malpractice review,’’ Anesthesiology, 1996; 85: 109-54 48 James Thompson, speaking at the Joint Commission Roundtable meeting, July 28, 2004

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